Mr Pischetsrieder has come through a difficult period

There had been speculation that Mr Pischetsrieder would not have his deal extended amid unhappiness at plans that may lead to 20,000 jobs cuts by 2009.

However, top managers are still set to be under pressure at the firm's annual shareholder meeting on Wednesday.

Some investors have called for chairman Ferdinand Piech to step down.

Conflicts

While Mr Pischetsrieder's cost cutting plans have received a frosty reception from unions, shareholders are unhappy about a deal led by Mr Piech that saw the luxury carmaker Porsche one of the biggest shareholders in Volkswagen.

Mr Piech is the grandson of Porsche's founder, and his family remains a major shareholder in the sportscar maker.

Volkswagen faces harsh competition

Faced with stiff competition from Asian rivals, Volkswagen plans to cut up to 20,000 jobs in the years up to 2009.

The move has proved unpopular with staff and trade unions, especially as Volkswagen had net profits of 327m euros (�225m; $408m) in the first three months of this year.

Even so, the results led to a fall in VW's share price as the firm's executives acknowledged they were still falling short of medium-term targets.

Half of the seats on the company's supervisory board are held by worker representatives and there had been speculation that they would vote against Mr Pischetsrieder continuing in his job.