VW/Porsche: Victory for Wolfsburg
By: Colin Whitbread, Thursday, July 23, 2009, AutomotiveWorld.com
The exit of Wendelin Wiedeking from his role as Porsche AG CEO marks the end of yet another chapter in what has been described as a dynastic feud between the Porsche and Piëch families. It also shows that, despite appearing to have the upper hand in attempts to secure a control agreement with VW AG through securing a 75% equity stake in the Wolfsburg-based OEM, in the end Wiedeking’s reach exceeded his grasp.
Viewed against the very grey background of the current auto industry recession and the bankruptcies at Chrysler and GM, the recent intertwined events in the ‘Wolfsburg versus Stuttgart’ battle and Porsche/ Piëch family conflicts provided a rare splash of colour, with some high stakes on the table. It remains to be seen whether Wiedeking’s exit, and that of his finance guru Holger Haerter, the driving force behind Porsche’s audacious and much-criticised recent financial engineering involving VW stock options, will lead to a more peaceful period in the VW Group’s history, but the potential for family conflict will surely remain, especially when the next generations assume a more prominent role. As well as exiting Porsche, Wiedeking and Haerter will step down from their respective seats on the Supervisory Boards of Volkswagen AG and Audi AG.
Only history will judge Wiedeking’s tenure at Porsche, but there can be few doubts that his contribution to Porsche’s revival from its pretty dire situation in the early1990s, a position which saw an acquisition approach from Toyota turned down by the family owners, has been critical. Wiedeking’s initial focus on updating Porsche’s laborious and inefficient production techniques for the 911 at Zuffenhausen, somewhat ironically through the use of lean production experts loaned from Toyota, attracted initial internal criticism from unions and Porsche executives, but undoubtedly paved the way for a much more cost-efficient manufacturing operation. Wiedeking also pioneered a highly significant, if unpopular in some purist circles, broadening of the Porsche model range through the introduction of the Boxster, Cayenne, Cayman and, most recently, the Panamera models. In a successful effort to suppress costs associated with the introduction of the Boxster, final assembly was outsourced to Valmet’s facilities in Finland, while development costs of the Cayenne were shared with Volkswagen (Touareg). Interestingly, Wiedeking’ replacement as Porsche CEO is another executive with a strong production pedigree - Michael Macht, formerly Porsche AG’s Production and Logistics head. Macht supervised the construction and start-up of the new Leipzig factory as well as the ramp up of the Cayenne and Panamera model lines.
With the value of hindsight, Wiedeking’s subsequent criticism of parts of Volkswagen’s new model strategy and his forthright position on other industrial, economic and political issues attracted damaging negative attention. But it was the audacious attempt to use Porsche’s €3bn cash pile, loans and share options to acquire a controlling interest in Volkswagen that proved the Porsche CEO’s undoing, especially as it brought him into inevitable conflict with Ferdinand Piëch, the Volkswagen Supervisory Board Chairman. Few, if any, enter into such a conflict and emerge victorious. Piëch’s willingness to ally with state politicians such as Christian Wulff, governor of Lower Saxony, which has an effective blocking minority stake in Volkswagen preventing Porsche lifting its stake to 75%, and clever use of the committee system within Volkswagen’s corporate governance structure effectively thwarted the ambitions of Wiedeking and Haerter. The impact of the credit crunch and global recession and the debt accumulated as part of the acquisition plan also proved decisive.
With Wiedeking and Haerter now departing with golden parachutes of €50m and €12.5m in their back pockets, Porsche will be managed by Macht and Thomas Edig, as Chairman of the Board of Management of Porsche AG and his deputy respectively. Both will also be members of the Board of Management of Porsche Automobil Holding SE (which was formed in November 2007 and holds 100% of Porsche AG and 50.76% of VW AG), Macht in charge of technology and products and Edig with responsibility for commercial issues and administration. Although Wolfgang Porsche, a family supporter of Wiedeking, will remain chairman of the Porsche Automobil Holding SE supervisory board, in reality this board will have a much-reduced role going forward as Porsche merges with Volkswagen, becoming a group brand alongside Audi etc in a newly-expanded empire managed from Wolfsburg. The Porsche Automobil Holding SE supervisory board has also sanctioned a capital increase of at least €5bn ‘in cash and/or contribution in kind’ to ‘create the foundation of building an integrated car manufacturing group with Porsche SE and Volkswagen AG.’ It has also authorised the Porsche Board of Management to finalise talks with Qatar Holding LLC over an investment in Porsche SE, with the same fundamental aim cited.
Many uncertainties regarding Porsche’s future development within the Volkswagen Group and the relationship between the two key owner families remain. What appears more certain is that a new and probably less colourful era for the Stuttgart-based OEM is about to dawn.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Published on Thursday, July 23, 2009
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