Volkswagen’s Brazilian operations head Herbert Demel is leaving to head Austrian engineering and automotive assembly company Magna Steyer, according to European reports.

The reports says Demel’s departure will be a severe blow to Volkswagen as the one time head of Audi has successfully restructured the Brazilian VW operation, substantially updating an ageing product line with the likes of the new Polo, launched earlier this year.

Demel has been in the Brazilian post since 1996 and was at one stime seen as a possible successor to outgoing VW chairman Ferdinand Piëch.

However, after apparently falling out with the autocratic former chairman, he was posted to Brazil to revitalise the then troubled South American subsidiary in what many industry observers saw as ‘exile’.

The European reports added that Demel’s prospects of heading VW diminished even further after former BMW chairman Bernd Pischetsrieder became chairman last April.

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Demel reportedly said Pischetsrieder’s arrival had nothing to do with his decision to leave and the two remained friends.

In a comment remarkably similar to one made by former Ford Premier Automotive Group head Wolfgang Reitzle when he left for German engineering group Linde, Demel reportedly added that the chance to run a company on his own for the first time was a big appeal of the new job with Magna Steyr.

Magna Steyr acquired the Eurostar vehicle assembly facility in Graz, Austria from DaimlerChrysler last month.

The Eurostar acquisition doubled the company’s vehicle assembly capacity to more than 200,000 vehicles per year. Magna Steyr currently assembles the Jeep Grand Cherokee and a number of Mercedes-Benz models including the M-class, and is currently developing a new Saab convertible with production scheduled to begin next year.

In October, 2001, Magna Steyr signed an agreement with BMW to develop and manufacture the company’s new X3 sport activity vehicle for global markets.