Hamburg  - Europe's biggest carmaker Volkswagen AG presented a picture of a solid financial performance at its annual general meeting Thursday as a power struggle took shape behind the scenes for the control of the German-based group.

VW Chef Martin Winterkorn told shareholders attending the AGM in Hamburg that never had the company sold so many cars and earned so much money with the group reporting before the meeting a 26-per-cent jump in first-quarter after-tax profit to 929 million euros (1.48 billion dollars).

As a result, laying a challenge to the carmaker's rival, the Japanese auto group Toyota.

However, Winterkorn is locked in an increasingly bitter struggle with Christian Wulff, the Premier of the German state of Lower Saxony over the so-called Volkswagen Law which protects VW from takeovers.

While luxury sports carmaker Porsche, which has a 31-per-cent holding in Volkswagen wants to scrap the law, Lower Saxony, which holds a 20.3 per cent stake, is campaigning to retain the rule.

Already Volswagen's biggest shareholder, Porsche wants majority control of Wolfsburg-based VW.

As a part of an effort to retain a blocking minority, Wulff has argued that an 80 per cent threshold should be maintained for major VW decisions. In general, the threshold stands at 75 per cent for German companies.

In the meantime, hundreds of workers held a noisy demonstration outside the AGM to protest Porsche's plans for a new labour relations structure at VW.

With tensions on the rise over Porsche's industrial relations plan, top VW labour leader Bernd Osterloh lashed out at Wiedeking accusing him of suffering from "dangerous fantasies of being all powerful."

VW shares edged down 1 per cent to 185.50 euros as the company's shareholders were meeting in Hamburg.

However, analysts are not expecting an early end to either the conflict over the labour relations question or the battle with Lower Saxony and believe both issues will result in protracted legal fights. (dpa)