Mr Winterkorn will take up the post at the start of next year

Chairman of Audi, currently the German carmaker's most successful division, Mr Winterkorn is regarded as someone who could shake up the business.

Shrinking profit margins and protracted disputes about productivity at its German plants have hurt the company.

It is unclear if brand chief Wolfgang Bernhard will now stay in his post.

Mr Bernhard was brought in by Mr Pischetsrieder to oversee the restructuring of VW.

Productivity battle

VW is cutting 20,000 jobs by 2009 in an effort to improve competitiveness. It wants to reform work patterns at its factories in western Germany to boost productivity.

Analysts believe Mr Pischetsrieder paid the price for the slow progress of talks between VW and unions on the issue, as well as general concerns about the company's future strategic direction.

Porsche upped its stake in VW to 27.4% on Thursday, but insisted that it was not looking to make a bid for the larger company.

Separately, VW has said it still supports a deal between German truckmaker MAN and Swedish counterpart Scania.

Scania has rejected a 10.3bn euros (�6.9bn) offer from MAN, which would create one of the world's largest truckmakers.

VW, a leading shareholder in both firms, said it supported an "amicable alliance" between the two, but added that it would keep "all alternative possibilities open", should the bid fail.