A Porsche brand group with Bentley and Bugatti will be created for the sportscar and mid-engine architecture. Audi brand group will continue with Lamborghini and Ducati. VW brand, Seat, and Skoda will continue to function separately.
The VW car brand will have four regional chiefs who will report to the brand's CEO Herbert Diess.
'Moral and political disaster'
The board meeting comes as VW grapples with the biggest business crisis in its 78-year history after it admitted to cheating on emissions tests for its diesel vehicles.
VW said this week that irregularities on diesel-emission readings extend to 11 million vehicles around the world, forcing the automaker to set aside 6.5 billion euros in an initial tally of the potential costs.
Acting chairman Berthold Huber made an apology to "our customers, the public, authorities and investors" and asked them to give Volkswagen a chance to make good on the damage from the emissions scandal.
"I want to be very clear, the manipulation of tests for diesel engines is a moral and political disaster," Huber said. "The illegal behavior of developers and technicians in the development of engines has shocked Volkswagen as much as it has the public."
He said a number of employees had been put on leave until the details of the emissions cheating were cleared up.
VW did not say if Audi development chief Ulrich Hackenberg and his Porsche counterpart, Wolfgang Hatz, are among those who will depart. The two previously ran units at the heart of the diesel emissions affair. Hackenberg, a Winterkorn confidante, was responsible for VW brand development from 2007 to 2013, while Hatz ran the group’s engine development from 2007 to 2011.
Chief technology post, groupwide units
VW will create the post of chief technology officer who will steer technical developments across its brands and speed up the rollout of new features.
The company said it will get rid of the position of group production chief, until now led by Thomas Ulbrich on an interim basis. This is part of a plan to delegate responsibility to the brands and regions. "Going forward, the brands and regions will also have greater independence with regard to production. So it follows that they should also hold the responsibility for these activities," Huber said.
Group functions will concentrate more closely on efficiency and future-oriented fields, VW said. The automaker will establish new units for group product strategy, new business fields, co-operations and holdings, connected car activities and CO2.
New, strong group functions, such as for standardization and harmonized production processes, will make the company become "faster and more agile," Huber said.
The board also said Hans Dieter Poetsch, who is currently the finance chief, will become chairman of the supervisory board following an extraordinary shareholders meeting in November to elect him to the board.
'Fortress Wolfsburg' challenge
Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler, said Mueller will be a problem-solver for the next 12 months or so. He will have to "credibly drive this process internally and represent it publicly," Pieper said.
While the challenge is significant, Mueller has experience dealing with critical audiences. As Porsche boss, he attended classic-car events to connect with purists and justify expanding into mainstream segments with models such as the Macan compact SUV. Under his watch, Porsche's profit rose 62 percent over four years, and deliveries are on track in 2015 to surpass 200,000 vehicles for the first time.
To succeed he will also have to dismantle “fortress Wolfsburg,” Pieper said, referring to VW Group’s centralized oversight, which funnels decisions through its headquarters.
Mueller was already touted as a potential VW Group CEO successor when former Chairman Ferdinand Piech failed in a bid to oust Winterkorn in April. Mueller is a long-serving VW Group employee, joining the Audi division as a toolmaking apprentice in the early 1970s.
VW has admitted to manipulating engine management software to fool diesel emissions tests in the U.S., sparking a crisis that wiped about 20 billion euros ($22.4 billion) off the company's market value this week. The automaker said 11 million cars globally had the software fitted but it was not activated in the bulk of them.
As well as the cost of regulatory fines and potentially refitting cars, VW faces criminal investigations and lawsuits from cheated customers and possibly shareholders.
Reuters, Bloomberg and Christiaan Hetzner contributed to this report