Family Feuds Behind VW-Porsche Deal

(page 5 of 5)

They were no match for Ferdinand Piëch, who had aimed for a grand solution for years: a VW-Porsche Group controlled by his family and, most importantly, with him at the helm.

'Please Say Nice Things about Me'

This is Piëch's aim in life and, as it turned out, he was in luck. Ironically, the financial crisis came to his aid. Porsche had made bad investments and was deeply in debt, to the tune of about €10 billion ($14 billion). The VW Group, for its part, had cash reserves of more than €10 billion—and money means power. VW offered to buy the Porsche sports car business. This would allow the Porsche holding company to pay off its debts with the proceeds.

But it would also have spelled the end of independence for Porsche. Härter, the chief financial officer, assured Wiedeking that Porsche could solve its debt problem on its own. Wiedeking told Wolfgang Porsche that an investment by the emirate of Qatar could save Porsche. WoPo was only too keen to believe that.

But Piëch was staging his own game. On May 11, he and his wife Ursula, looking relaxed, made an appearance on the terrace of a hotel on Sardinia's Costa Smeralda to unveil the new VW Polo to several dozen journalists. They listened raptly to the words of the patriarch, who dispatched his rival in a few short sentences. "At the moment, I still have confidence in Wiedeking," he said. Then, after a short pause, Piëch added: "Delete the word 'still.'"

He said that he didn't expect Wiedeking to go without a fight. The Porsche CEO would have to "step down several levels," Piëch said, going from all-powerful boss to a "more humble" position.

Later, Ursula Piëch urged her husband to stop talking. "Anything you can't get done by 11 p.m. isn't going to happen," she said. "And only rogues go to bed at midnight." The two smiled distractedly, and Piëch took his leave with the words: "Please say nice things about me."

Wiedeking is putting up a fight. Help from Qatar is his last hope, but the Qataris, reluctant to become involved in a feud between the two families and the two companies, insist that they will only invest after the parties have come to terms, and that they will be investing in VW, not Porsche.

Time to Shut Up

Wolfgang Porsche, for his part, refuses to admit defeat, at least not in public. When Porsche works council chairman Uwe Hück asked him last week where things stood, he said: "Everything is still up in the air." He even denied plans to dismiss Wiedeking. Instead, he launched into an attack on Christian Wulff, saying that it was time for the governor to "finally shut up."

The Porsche and Piëch families have long come to terms over the future of the two companies. A decision could be made as early as the supervisory board meeting this Thursday. Under the plan, Porsche AG will be sold to VW in two stages. VW will initially acquire 49.9 percent of Porsche, and it will purchase the remaining shares at a later date. Porsche Automobil Holding will likely receive about €8 billion ($11.2 billion) for the shares, which will allow it to pay off most of its debt. VW may even acquire the families' Salzburg dealership, which would likely fetch more than €3 billion ($4.2 billion).

In return, the families will keep more than 50 percent of a combined VW-Porsche Group. The state of Lower Saxony will retain its 20 percent share, while Qatar will acquire a package of between 14.9 and 19.9 percent.

The assets of the Porsches and Piëchs have multiplied. Before the investment in Wolfsburg, they owned 100 percent of Porsche, a small sports car maker. Now they own more than half of the world's second-largest automobile group. As dirty as it was, it was an extraordinarily profitable family feud.

The merger places the German-Austrian industrialist clan on a level with the world's biggest corporate dynasties: the Fords, the Agnellis and the Peugeots.

The Next Generation

Nevertheless, Wolfgang Porsche emerges as the loser in this contest. Although he will remain chairman of the supervisory board of Porsche Automobil Holding, its role will be minimal in the future. He also faces the uncomfortable prospect of being viewed as a traitor by Porsche employees, having failed to prevent the sale to VW.

Will he be booed by employees on Sept. 19, when they celebrate the 100th birthday of his deceased father Ferry at the new Porsche Museum? Ordinary mortals may smile at such worries, but it's a serious issue for Wolfgang Porsche—and one that shows that the past is unlikely to be forgotten in either of the two families.

Many questions remain unanswered. For example, how many millions will Wiedeking take with him as his golden parachute? What role do the sheikhs from Qatar want to play in Wolfsburg? How will the small sports car maker fare as a new brand within the large VW empire? And, perhaps most importantly, will the combined VW-Porsche corporation become a new battleground for the feuds of the Porsche-Piëch clan?

Things will get truly exciting when the next generation of both families takes the reins. When that happens, even more people will have a say in the future of the automobile group.

Ferdinand Piëch stands the best chance that one of his children will have inherited the automobile genes from him. He once said that the youngest of his 12 children was best suited to fill his shoes. But he is still a teenager—and he doesn't even have a driver's license yet.

Translated from the German by Christopher Sultan

Provided by Spiegel Online—Read the latest from Europe's largest newsmagazine

Business Exchange

Track and share business topics across the Web.