HAMBURG/STUTTGART (Reuters) - The executive committee of Volkswagen's (VOWG_p.DE) supervisory board has proposed extending Martin Winterkorn's contract as chief executive until the end of 2018, the company said on Tuesday, opening the door to the appointment of a new chairman.
Volkswagen is still looking for a permanent successor to Ferdinand Piech, the former chairman who was ousted earlier this year after clashing with Winterkorn over strategy, leading to the appointment of former union boss Berthold Huber as interim chair.
Analysts said Winterkorn was now unlikely to become chairman himself now he had the backing to remain chief executive from the key members of VW's supervisory board - including influential labor leaders and representatives from the German state of Lower Saxony, a top shareholder.
"With 71 years of age at the end of his CEO function he will be too old in our view. This increases the chances for an external chairman which is good news," analysts at Evercore ISI said in a note on Wednesday.
For decades Piech controlled the balance of power between the interests of shareholders and powerful worker representatives, who occupy half the seats on the 20-member supervisory board.
But analysts and investors are now hoping for the appointment of a strong independent chairman to work with Winterkorn to tackle some of the company's problems, such as low profitability at the core VW brand.
One person who could emerge as candidate to take over as chairman is Chief Financial Officer Hans Dieter Poetsch, a person familiar with the deliberations said. "But there are other candidates too," the person said.
The issue of who will become chairman will likely be resolved this year, a spokesman for Lower Saxony said on Wednesday. Lower Saxony has a 20 percent stake in VW and state premier Stefan Weil sits on the supervisory board.
Piech was ousted in April after Lower Saxony representatives clubbed together with VW's labor representatives to back Winterkorn. Since then they have sought to exert influence over the new strategy to strengthen the focus on raising productivity without cutting jobs in Lower Saxony where VW is headquartered.
"Winterkorn is the right man at the head of Volkswagen, particularly given the challenges in the coming years," said Weil.
Currently Winterkorn is overhauling Volkswagen's corporate structure to create a decentralized system with four holding companies in a bid to boost profits at Europe's largest carmaker, three VW sources told Reuters in June.
"We have been asking for this step for the past year and a half, so we are pleased that we will continue on a path to success with Martin Winterkorn," Bernd Osterloh, the head of Volkswagen's works council, said on Wednesday, affirming his support for the extension of Winterkorn's contract.
Volkswagen's supervisory board is now expected to formally approve Winterkorn's new contract, which was otherwise due to expire in 2016.
"Together with Professor Martin Winterkorn at the helm we will continue on our successful path of recent years and systematically implement the goals of Strategy 2018," Huber said in a statement.
Writing by Edward Taylor; Editing by Maria Sheahan and Greg Mahlich