Volkswagen named Thomas Schmall as the new VW brand board member responsible for components – a key post that carries with it the potential for political friction with the carmaker’s powerful German unions.

Schmall, 50, is currently head of VW’s Brazilian operations. He succeeds Werner Neubauer, 65, who is taking retirement on Jan. 1.

Schmall will have the task of helping VW CEO Martin Winterkorn to boost the brand’s profits by some 5 billion euros by 2017, in part by shifting company resources from building lower-end commodity parts to more technically advanced ones.

Winterkorn told the German magazine Der Spiegel in October that he was considering outsourcing operations such as brake disc manufacturing, and allocating a more innovative product to VW’s plant in Brunswick, Germany, in its stead.

VW aims to achieve an operating margin of more than 6 percent in the mid-term, which would be a significant improvement over last year’s 2.9 percent.

The position of VW brand components chief was created in 2007 after conflict between the then-VW brand CEO, Wolfgang Bernhard, and the carmaker’s German labor union leaders, some of whom sit on the group’s supervisory board and have a say in hiring and firing senior management.

As part of an effort to turn around VW’s German operations, which were losing money at the time, Bernhard had come down hard on the brand’s in-house component production, telling reporters in March 2006 that a “considerable portion was far from being competitive.”

Bernhard ended losses at VW’s six western German plants, thanks largely to thousands of job cuts, but no major changes were made to VW’s parts production and Bernhard left the company at the start of the following year weeks after a boardroom coup had enthroned Winterkorn as the new CEO.

The component operations, which Bernhard in parts had hoped to outsource, were then bundled together on an organizational level with Neubauer appointed to oversee them.

In addition to the German component plants in Brunswick, Kassel, Salzgitter and Chemnitz, they include other European sites such as an engine plant in Polkowice, Poland, VW’s Sitech seating subsidiary, and a parts factory in Martin, Slovakia.

In a statement, Winterkorn thanked Neubauer for his contribution, saying it was his legacy that VW’s component business is now “a versatile, innovative and competitive supplier of key parts, thus making a sustained contribution to Volkswagen’s economic success.”

Schmall joined VW in 1991 and previously served as manager of the Curitiba plant in Brazil in 2000 before becoming VW Slovakia chairman in 2005 and head of VW’S Brazil operations two years later. His position in Brazil will be taken on by David Powels, 52, managing director of VW South Africa operations. Powels began his career at VW of South Africa in 1989 in the finance division and has held posts with Audi and VW’s Brazil division.