Volkswagen AG, Europe's biggest car maker, said on Tuesday that Bernd Pischetsrieder will step down as chief executive after four years and be replaced by Martin Winterkorn, head of the company's premium Audi unit.
Pischetsrieder, who got a five-year contract extension in May, leaves with the company profitable but in the midst of a painful cost-cutting program.
Volkswagen said the presidium, or executive committee, of its board of directors recommended Winterkorn take over on Jan. 1. The full board will decide on the move at a meeting next Thursday, it said in a statement.
It didn't explain the reasons for the departure of Pischetsrieder or say whether he would continue in any role at the company.
The announcement came the same day Volkswagen's closest European rival, French car maker PSA Peugeot Citroen SA, named former Airbus CEO Christian Streiff as its new chief executive. Streiff replaces Jean-Martin Folz, who announced in September that he planned to step down after 10 years amid deteriorating sales and earnings.
Pischetsrieder, 58, is leaving Volkswagen without seeing through a restructuring program including cutting as many as 20,000 jobs and introducing longer working hours in Germany.
Volkswagen's earnings have begun to improve, boosting its share price. The company's stock has risen by nearly three-quarters in the past 12 months.
Last month, Volkswagen posted a 77 percent rise in net profit and stronger sales for the first nine months of the year, despite high restructuring costs that weighed on third-quarter results.
However, the chief executive has been dogged by speculation that labor representatives, who hold half the seats on Volkswagen's board, have resisted his strategy to make Volkswagen more competitive amid tough competition among global car makers.
Company chairman Ferdinand Piech raised eyebrows earlier this year when he said that it was an "open question" whether Pischets-rieder's contract would be renewed next year.
In May, however, the board had approved a five-year contract extension for Pischetsrieder following weeks of uncertainty about his future.
Pischetsrieder has also had to contend with an investigation into suspicion of fraud and improper payments against former personnel executive Klaus-Joachim Gebauer and former Skoda chief Helmuth Schuster, suspected of setting up fake companies in countries including India and the Czech Republic to defraud local authorities seeking business with Volkswagen.
Christian Wulff, the governor of Lower Saxony state, which owns 14 percent of Volkswagen's capital, thanked Pischetsrieder for his "successful" leadership of the company and wished his successor the same.
"Volkswagen is on a good track that must be followed further," Wulff said in a statement.
Volkswagen's biggest shareholder is rival Porsche AG, with 21.2 percent of the voting stock.
Winterkorn, meanwhile, has made Audi into a brand with the ambition of taking on the likes of DaimlerChrysler AG's Mercedes-Benz and BMW AG.
Volkswagen announced earlier Tuesday that Audi has delivered 757,000 cars in the first ten months of the year -- 8.7 percent more than in the year-earlier period and a new record.
Winterkorn, 59, joined Audi in 1981 and held various positions at Volkswagen before becoming the CEO of Audi, which also includes the SEAT brand, in 2002.