BERLIN (Reuters) - Volkswagen's (>> Volkswagen AG) finance chief Hans Dieter Poetsch is set to become its next chairman, putting Europe's biggest carmaker on course for calmer waters after rival factions including ousted patriarch Ferdinand Piech united to back him.

The company has been looking for a permanent successor to Piech, who was turfed out in April after clashing with Chief Executive Martin Winterkorn over strategy but still wields influence through his family holding.

One day after proposing to extend the CEO's contract by two years until the end of 2018, the supervisory board's executive and nomination committees on Thursday proposed to elect Poetsch, 64, as chairman.

Volkswagen's 51-percent owner Porsche Automobil Holding SE (>> Porsche Automobil Holding SE) said Poetsch had the unequivocal support of its supervisory board - which includes Piech. Winterkorn also supported the move to elevate Poetsch, according to a source familiar with the company's thinking.

"This is good news," said Arndt Ellinghorst of research firm Evercore ISI, citing Poetsch's clear understanding of VW's financial problems. "Poetsch has been advocating an increased focus on consolidating VW's business post an era of M&A."

VW's plans to appoint Poetsch, who has been the German group's finance chief since 2003, to the helm of its 20-member board were reported earlier on Thursday by Reuters.

Shares in Volkswagen rose on the news, trading up 2.7 percent at 167.50 euros by 1506 GMT but still underperforming a 3.2 percent-stronger German DAX <.GDAXI>.

Wolfsburg-based Volkswagen chose an internal candidate who understands the complexities of the relationship between labor unions, investors, major shareholder Lower Saxony and the Porsche-Piech clan.

Appointing an external chairman would have caused more unrest than stability, according to the source familiar with the company's thinking.

"Everybody at VW believes firmly that the current problems can be overcome on our own," the source said.

Poetsch is likely to be elected for a full five-year term - even though he is replacing Piech whose board mandate officially expires in April 2017, a source at VW said.

This would represent a break from tradition for the company, as a new board member usually serves out the remaining term of his predecessor before a new election takes place.

If Poetsch were to serve out his full term, that would effectively put an end to 68-year-old Winterkorn's ambitions of becoming chairman himself, earning a belated victory for Piech who had pledged to thwart the CEO's chances of succeeding him.

However, any success by Winterkorn in turning VW around could nevertheless bolster his chances of nudging the new man out and becoming chairman himself.

Poetsch will first have to be elected to the supervisory board at an extraordinary shareholder meeting in November, which will also have to approve the appointment to the board of Piech's niece, Louise Kiesling.

Huber said the supervisory board would decide on a successor for Poetsch as CFO without delay.

The chief executive of VW's premium carmaker Audi, 52-year-old Rupert Stadler, is a candidate to succeed Poetsch as VW CFO, a source familiar with the matter said.

(Additional reporting by Edward Taylor and Jan Schwartz; Editing by Georgina Prodhan and Pravin Char)

By Andreas Cremer

Stocks treated in this article : Man SE, Audi AG, Volkswagen AG, Porsche Automobil Holding SE