Posted by: David Kiley on July 7, 2009
Top management of German auto companies Porsche AG and Volkswagen will come to the table in the next two weeks to discuss an investment by the Qatar sovereign wealth fund and how that could possibly strengthen Porsche’s bid to takeover Volkswagen AG.
Porsche CEO Wendelin Wiedeking has been pursuing a strategy of trying to acquire control of VW since 2005 when he first bought a stake in the larger company. That strategy blew up in the CEO’s face, though, last Fall when the global capital markets tanked and Porsche got caught holding risky derivative investments it was using to finance its acquisition of VW.
The dealings between Porsche and VW have taken on a soap-opera-like quality. The VW supervisory board chairman is Ferdinand Piech, the great grandson of Ferdinand Porsche. His family is also part of the controlling stakeholders in Porsche.
The Porsche and Piech clans have long been rivals. At one time, it was believed that Piech and Wiedeking were working in concert to have Porsche acquire VW. But in recent months, Piech has been openly critical of Porsche’s moves and its excessive debt.
Piech, as a significant Porsche shareholder, can, in fact, block the Qatar investment. Qatar is looking for voting shares in Porsche in exchange for investing billions. Up to now, the Porsche and Piech families have controlled all the voting shares.
If Wiedeking is blocked, and the Qatar investment doesn’t go through, there is the strong likelihood that he will be ousted as CEO and that Porsche will be absorbed by VW. It would be a spectacular fall of one of Germany’s leading industrial executives. Wiedeking has been CEO of Porsche since the early 1990s and led the sports car company to be the most profitable, as measured by operating margin, auto company in the world.
Porsche currently owns 51 percent of VW.
Wiedeking has so far failed to secure 1.75 billion euros in loans it wants from commercial banks or from KFW, a state-controlled bank in Germany.
Qatar is approaching a potential investment in Porsche as a passive financial investor and is apparently open to investing in either company.