Porsche CEO Wendelin Wiedeking and financial director Holger P. Haerter have resigned from their positions "with immediate effect."
Wiedeking will receive 50 million euros ($71 million) in compensation, while Haerter will receive 12.5 million euros.
The German luxury automaker announced the shake-up after a meeting of its supervisory board that went on late into Wednesday night.
"The ultimate goal is to lay the foundations for creating an integrated car manufacturing company from Porsche SE and Volkswagen AG," Porsche Automobil Holding said in Wednesday's statement.
The news comes as Porsche and Volkswagen have been locked in a public power struggle concerning competing visions for a merger or possible takeover of one company over the other.
Wiedeking made no secret of his ambition to have Porsche increase its stake in VW, take over the company, and build it into a rival to Toyota in terms of global sales.
But there's been speculation that in an ironic twist of fate VW may in fact end up taking over Porsche, which has been financially struggling for the last year.
Porsche is estimated to be between 9 billion and 10 billion euros in debt from both a global decline in sales over the last year due to the recession and from its expenditures on VW stock over the years.
Wiedeking was appointed Porsche CEO in 1992 and turned the company around from a struggling entity into one of the most profitable car manufacturers in the world. Then in 2005, Wiedeking directed Porsche to buy a 20 percent stake in VW and continued having the company buy VW common stock with the intent of gaining a controlling interest.
By 2007, Porsche had overcome legal obstacles regarding its VW takeover ambition and Wiedeking joined VW's supervisory board. He also became chairman of the holding company, Porsche Automobil Holding, which currently owns both Porsche and a 50.76 percent stake in VW.
In Wednesday's meeting, Porsche Automobil Holding's board also approved Porsche management to finalize negotiations with Qatar to invest in Porsche. But financial analysts predict that the approved cash injection from Qatar will not be enough to help Porsche out of its financial problems.
Wiedeking's and Haerter's resignations are widely believed to be the first step in a planned VW takeover to save Porsche.
Michael Macht, a Porsche board member in charge of production and logistics, will replace Wiedeking as CEO. Thomas Edig, a Porsche board member in charge of human resources, will become Macht's second in command, according to Porsche Automobil Holding's latest statement.