THE PORSCHE STORY
Part 1: A Fierce Family Feud
By Dietmar Hawranek
Volkswagen looks set to acquire Porsche, the troubled German sports car manufacturer. At the core of the companies' tightly intertwined histories is a deeply divided family engaged in a power struggle worth billions -- and which could determine the fate of two of Germany's most famous carmakers.
In the end, the two men shook hands after all. When Ferdinand Pi?ch encountered his rival Wendelin Wiedeking last Thursday evening at an event to celebrate the 100-year anniversary of Audi, they greeted each other briefly.
The battle had been decided. Pi?ch had fought hard, as he enjoys doing when something really important is at stake. "Either I'm shot dead, or I win," he says.
This time he had faced a formidable foe: Wendelin Wiedeking, the man who had saved Porsche and then, in the style of a true turbo-capitalist, had tried to take over the much larger Volkswagen Group. With an annual compensation of about ?80 million ($112 million), he was Germany's highest-paid corporate executive -- and one of its most controversial. "For many people, I am a nightmare," Wiedeking says about himself.
Now it's time for Wiedeking to go and Porsche production chief Michael Macht to take his place. The Porsche brand will be absorbed by the VW Group, in which the emirate of Qatar would then also purchase a stake. But the next set of conflicts is already taking shape.
Wiedeking himself is leading the fight for his severance package. At issue is a sum in excess of ?100 million ($140 million), an amount that will catapult the debate over executive compensation in Germany into a new dimension. It will likely be the largest golden parachute in the history of German business. Ironically, it will be paid to the manager who, despite having saved Porsche, has since maneuvered it into a crisis that almost bankrupted the luxury carmaker.
In this discussion, some of the things the Porsche boss has said in the past may come back to haunt him, including the statement: "You can assume that I won't be going to the poorhouse."
A Dynastic Feud
Another ongoing conflict will also continue, namely that between the Porsche and Pi?ch families. Wiedeking was merely a proxy in a dynastic feud of a kind that has rarely been seen in German industry.
On one side of this conflict is the Porsche family, led by Wolfgang Porsche, an amiable businessman who was always in the shadow of his father, engineer Ferry Porsche, and his brother Ferdinand Porsche, and who only assumed the chairmanship of the Porsche supervisory board at the age of 63. He is normally the kind of man who prefers reconciliation whenever possible. He likes to defuse tense situations by telling jokes. Wiedeking was among those who fought on his behalf.
On the other side is the Pi?ch family, led by Ferdinand Pi?ch, who fought his way to the top, first at Audi and later in the VW Group, battling intrigues for decades, creating some of his own and eliminating dozens of rivals in the process. For Pi?ch, life has been a struggle to survive since his childhood. He once said: "When I have lost confidence in people, I deliberately allow them to fall by the wayside."
Until now, it was always an unevenly matched battle, from which Pi?ch usually emerged victorious.
The Porsches employed a pinprick strategy. They once characterized the Pi?chs as the "rival family." And yet the only reason their surnames are different was that the progenitor of the clan, Ferdinand Porsche, had a son, Ferry, and a daughter, Louise. As a result, Ferry Porsche's children ended up with the mythical surname Porsche, while Louise's children acquired her husband's surname, Pi?ch.
Whenever Wolfgang Porsche wants to annoy his cousin, he refers to him as a "non-namebearer."
The psychological games and foibles of this industrial dynasty would be little more than laughable, if only they had remained a family matter. But the rivals are now battling over who is to control their combined assets, which in the future will include more than half of a merged VW-Porsche Group. The new organization will employ 370,000 people and aims to become the world's largest carmaker. At the same time, it will encompass two symbols of German industrial history that are burdened with particularly strong emotions.
On the one side is the Volkswagen Group, with its Beetle, which Hitler planned as the "people's car" and which later became a symbol of Germany's post-war Wirtschaftswunder ("economic miracle"). On the other side is Porsche, with its 911, revered worldwide as the quintessential sports car and a pinnacle of German engineering achievement. The myth of the Porsche brand was even enhanced by a horrific accident: the death of the actor James Dean in 1955, who was driving a Porsche when he died.
American comedian Jerry Seinfeld, who collects Porsches, is apt to lose his sense of humor the minute someone drops so much as a crumb in one of the more than 20 cars in his collection. A Porsche always makes you feel "like you're in the future," he says. VW, on the other hand, represents the somewhat more mundane present.
The two brands could hardly be more unlike. Porsche sells dreams, while Volkswagen sells reality. Porsche is the glossy icon of exclusivity while Volkswagen represents the sturdy, reliable vehicle of the masses. Luxury versus affordability, the moneyed elite versus the new middle class, golf aficionados versus "Generation Golf," as those who grew up in West Germany in the 1980s have been dubbed. And all of this is to be united under one roof in the future, and run by two deeply divided branches of the same family?
Part Comedy, Part Drama
The two companies have been connected by the Porsche clan since they were founded. Many of the elements of bitter power struggles between Porsche managers in the southwestern city of Stuttgart and their VW counterparts in the northern city of Wolfsburg, between the employee representatives of both companies and even between the governors of the two German states where their respective headquarters are located, are rooted in the history and genes of this family.
Its history is a mirror image of German history, one in which Hitler and forced labor played a role, as did Germany's postwar economic miracle and, more recently, Anglo-American-style capitalism. It was with methods more typical of a hedge fund than a small sports car manufacturer that Porsche embarked on a campaign, beginning in 2005, to acquire the VW Group, a company 15 times its size.
The family clan behind the takeover effort has had decades of experience in an ongoing feud -- a struggle that revolves around power and billions, as well as strong emotions, minor humiliations and, in some cases, women.
The entire affair is bizarre and amusing, part comedy and part drama. But the conflicts within the Porsche clan also demonstrate that the kind of family businesses which play a key role in the German economy are not always entirely a good thing. They can, admittedly, have a stronger long-term orientation than publicly traded corporations, which are forced to distribute profits as quickly as possible. But they can also descend into chaos when their owners devote too much time to their own affairs, to the detriment of the companies themselves.
In the case of Porsche, each side has already inflicted so many wounds on the other that a rational discussion between the two is hardly feasible anymore. And even if the two families have now come to an agreement over the future of the merged organization, the VW-Porsche Group and its employees can expect something of a bumpy ride in the months to come.
That, at any rate, is the lesson to be learned from the history of the Porsche family's two main businesses: the sports car manufacturer in Stuttgart and the dealership network based in Salzburg, Austria.
Ferdinand Porsche had once divided his estate into these two companies, with his son Ferry at the helm in Stuttgart and his daughter, Louise Pi?ch, in control of the dealership company in Salzburg.
The history of the two Porsche companies must seem deeply ironic to the employees and shareholders of Volkswagen. For decades, the Stuttgart and Salzburg businesses were only able to grow into corporations with billions in sales because they cooperated with -- and benefited from -- the VW Group. And then, when Porsche had accumulated enough capital, it tried to take over the Wolfsburg-based giant.
"We fed two little monsters," comments one VW executive. "And now they want to devour us."
A Fight to Survive
Ferry Porsche laid the foundations for those later developments on Sept. 17, 1948. At the time, Beetles were being built again at the Volkswagen plant in Wolfsburg under the supervision of the British, who were then in control of the state of Lower Saxony where Wolfsburg is located. This was strictly speaking illegal, because the Porsche design firm, Porsche Konstruktionen GmbH, still held the patents for the model.
Heinz Nordhoff, VW's managing director, met with Ferry Porsche and Anton Pi?ch in the Bavarian town of Bad Reichenhall to establish a proper basis for relations between the two companies. The representatives of the Porsche-Pi?ch clan came to an agreement on three issues:
* Porsche would receive a licensing fee of five German marks for each Beetle produced up until the end of 1954. This provided the company with fresh capital.
* The Volkswagen plant was required to supply Porsche with the parts it would need for its planned automobile production plants. This enabled the Stuttgart-based company to build its own sports cars, despite having few employees and small production facilities.
* Porsche became the authorized dealer for VW models in Austria, establishing the foundation for a commercial enterprise that now sells cars from almost all the VW Group's brands and has annual sales of ?13 billion ($18.5 billion).
Since their founding, the companies have been plagued by disputes between the Porsche and Pi?ch families, which are divided by more than just their names. The families are fundamentally different in their mentalities and even in their approaches to raising children.
Louise and Anton Pi?ch sent their children to a boarding school. Ferdinand Pi?ch describes it as a "typical boarding school experience, meant to toughen you up -- elitist, Spartan and strict." He had to fight and struggle to survive. According to Pi?ch, who would eventually become head of VW, the experience left him with "an extremely strong mistrust of others" and the realization that many things "can only be achieved by doing them yourself, because you can't rely on others."
Ferry Porsche, on the other hand, sent his four sons to alternative Waldorf schools. Their education was based on the principles of the Austrian thinker Rudolf Steiner, who founded the spiritual movement known as Anthroposophy: "Receive the children in reverence, educate them with love and send them forth in freedom." A member of the Pi?ch clan derisively characterizes the educational emphasis in the Porsche family as "crafts, crocheting and singing."
'We Have a Few Percent More than You'
Nevertheless, the Pi?chs long benefited from the fruits of this upbringing. Whenever there were conflicts, the Porsches consistently sought compromise or simply gave in. But this approach had ceased to work by the early 1970s, when sharp differences developed among the four descendants of the families who were working at Porsche: designer Ferdinand Alexander Porsche, who had designed the successful 911, production chief Hans-Peter Porsche, distribution chief Hans Michel Pi?ch and R&D chief Ferdinand Pi?ch.
The conflict began with Ferdinand Pi?ch, who had backed the extremely costly development of the Porsche 917 racecar. His approach at the time was the same one he would apply in his subsequent career at Audi and VW: He insisted on the best technology possible, at any cost. The others accused him of wasting money, while he in turn scoffed that, in a family business, one's career can suffer a setback "if you don't say a proper hello to a family member at breakfast."
'We Quarreled Terribly'
In 1970, Ferry Porsche summoned the family members to take part in group therapy at Sch?ttgut, a farm in the Austrian town of Zell am See where he and his sister Louise Pi?ch had taken their children during World War II. He hoped that the building alone, as well as the memories of their shared childhood experience, would have a calming effect on the rebellious offspring.
But the outcome of the gathering was not what he had expected. "We quarreled terribly," says Ferdinand Pi?ch. The family decided that none of its members would work at Porsche in the future, and that outside managers would run the company.
Since then, most of the family members have only played within the auto industry the role of relatively invisible Porsche owners, but no longer as active managers. However, for Ferdinand Pi?ch, the changes jump-started his career, which first led to the top post at Audi and then to the chairmanship of the VW Group.
The fact that Pi?ch became the central divisive figure in the family early on was partly attributable to his turbulent private life, which is reflected in numbers: He has 12 children from four different relationships.
He was first married during his student years, and that marriage produced five children. In 1972, he had an affair with, of all people, Marlene Porsche, the wife of his cousin, Gerd Porsche. The transgression turned the Porsche clan against the Pi?ch scion. The Porsches objected to the affair, partly on moral grounds, but also because it upset the carefully balanced equilibrium between the two families.
The estate of Ferdinand Porsche had been equally divided between the Porsches and the Pi?chs. Ferry Porsche and his four children each had a 10-percent share of the sports car manufacturer and the dealership organization. His sister Louise Pi?ch and her four children also owned 10 percent each. But when Marlene Porsche divorced Gerd Porsche, he was forced to relinquish a portion of his share to her.
This led some members of the family to accuse Ferdinand Pi?ch of trying to secure a larger share in the company through his liaison with Marlene. Pi?ch says: "For that reason alone, marriage would never have been an option for me."
Creative Energy
Ferdinand Pi?ch lived "more or less together" with Marlene for 12 years, during which he fathered two children with her -- and two more with another woman. "I can identify with both the ascetic and the oriental way of life," he later said, commenting on his lifestyle. "At any rate, I know that I derived my creative energy from the quieter times."
He eventually left Marlene for a nanny, Ursula Plasser, to the renewed chagrin of the other branch of the family. Pi?ch had three children with Plasser, and the couple is still married today.
The way he treated Marlene still enrages some members of the Porsche family when they encounter Ferdinand Pi?ch today. His older brother Ernst also caused his share of distress when he tried to sell his shares in the company to Arab investors in 1983. The remaining family members had to raise close to 100 million German marks to prevent the sale. Because the two sides of the family split Ernst Pi?ch's shares, the Porsche side has held more than half of the shares since then.
The incident, which the family refers as the "Ernst case," still affects internal conflicts today. Admittedly the families have committed themselves to voting in unison on the Porsche supervisory board and in the Salzburg-based network of dealerships, which requires that they come to an agreement beforehand.
However, whenever there is discord, Wolfgang Porsche is fond of reminding the "other family" that "we have a few percent more than you."
Part 2: The Downfall of a Corporate Upstart
By Dietmar Hawranek
Porsche CEO Wendelin Wiedeking turned the luxury sports carmaker around in the 1990s. But his archrival Ferdinand Pi?ch would put a stop to Wiedeking's grandious scheme to take over much-larger Volkswagen. The plan would nearly bankrupt Porsche.
Sports car maker Porsche entered a severe crisis in the early 1990s. There had been a sharp slump in the US market, where Porsche sold half of its vehicles. Toyota offered the equivalent of ?1.5 billion ($2.1 billion) for the company, but the family was unwilling to sell.
In 1993, the previously unknown head of production, Wendelin Wiedeking, was promoted to CEO. The first five or six years in the position were Wiedeking's best. He was able to shine as the man who turned Porsche around -- even if his methods were sometimes unpopular.
He brought Japanese consultants into the plant, which the proud Porsche assembly workers in Stuttgart perceived as an insult. On one occasion, the young chief executive walked into the plant, angle grinder in hand, and destroyed iron shelving, to show the suspicious employees that streamlined Japanese-style production required no excess inventory. Wiedeking also shouted at managers, and when someone refused to cooperate, he would threaten to "cut off his balls."
Even Ferdinand Pi?ch, who by then had moved from the top post at Audi to the chairmanship of the VW Group in Wolfsburg, was impressed. He admitted that he couldn't imagine having reorganized Porsche as thoroughly as Wiedeking did.
The families proved to be generous. They guaranteed Wiedeking that in the future he would receive roughly 0.9 percent of the company's profits as a bonus. No one could have imagined that the small carmaker's profits would balloon to more than ?8 billion ($11.4 billion), earning Wiedeking more than ?80 million ($114 million) in annual compensation.
Then the second phase of Wiedeking's tenure began, as the Porsche CEO established himself as an outspoken critic of all and sundry. He accused then-Chancellor Helmut Kohl of failing to understand the economy, and he railed against government subsidies, saying: "Luxury and support are incompatible." He was also sharply critical of the wave of mergers in the industry. "If size were the decisive criterion," he said, "the dinosaurs would still be alive."
Bigger Cigars, Wider Pinstripes
He expressed what many people were thinking. Nevertheless, Wiedeking remained an outsider in the industrial sector, someone who was only allowed to get away with saying the things he said because he was merely the head of a relatively small company. Wiedeking himself portrayed this approach as the secret of his success. He even published a book called "The David Principle," a reference to the Biblical story of David and Goliath.
Gradually, the pinstripes on his suits became wider and the cigars bigger. Wiedeking increasingly spoke in the first person when he was talking about the company. He behaved like a business owner and not like a paid manager whose contract could be terminated at any time.
This couldn't possibly go over well with someone like Ferdinand Pi?ch, for whom Wiedeking had become too successful. Perhaps it was because Pi?ch was unwilling to tolerate anyone being as powerful as he was, or perhaps it was simply due to the fact that the billionaire does not like people who are overly cocky or loud.
When Pi?ch wants to give a manager his opinion, he says, very quietly: "Now that wasn't a good idea at all." Then he is silent for what seems like an eternity, until sweat begins to appear on the other person's forehead. At that point, the manager might as well start packing up his desk.
As the head of VW, Pi?ch also knew that Porsche owed a large share of its success to its cooperation with Volkswagen. For example, the Zuffenhausen-based company would never have managed to develop the Cayenne SVU on its own. And the families' dealership in Salzburg, which had a low public profile, experienced a sharp upswing when VW gave it the import rights for the VW brands Volkswagen, Audi, Skoda and Seat in many Eastern European markets.
Other carmakers handle this kind of business themselves, which led to the suspicion that VW had effectively given the Porsche and Pi?ch families' commercial enterprises a license to print money. Pi?ch says today that accountants scrutinized the accounts every year to determine whether the Porsche companies had been given preference in decisions made within the VW Group, but that they never found any such evidence. Pi?ch also insists that as CEO of Volkswagen he consistently abstained from voting on decisions relating to these contracts.
A Call from Schr?der
In any case, the families' Salzburg business grew to become Europe's largest car dealership, providing them with a second mainstay next to the Porsche sports car manufacturing company. But in 2000 Pi?ch learned, after receiving a call from then-Chancellor Gerhard Schr?der, that the future of the two family companies was in jeopardy. Ford CEO Jacques Nasser had asked Schr?der whether the German government had any objections to the US automaker acquiring a stake in VW.
Having Ford as a new majority shareholder could have put an end to the collaboration with Porsche and the Salzburg dealership. Pi?ch asked family members whether they were willing to invest in the VW Group instead, but he failed to convince them. Although some members of the clan would have liked to acquire a majority stake in VW subsidiary Audi, they felt that VW itself was too large and too risky.
This meant that Pi?ch had to fend off the attack from the United States on his own. He refuses to reveal how he managed to do so, although he does say that he convinced the Ford CEO "that I was an adversary to be taken seriously." The people at Ford, says Pi?ch, "quickly gave up."
The Kafka-Loving CFO
Five years later, VW was confronted with yet another takeover plan, when Wiedeking proposed to the families that they invest in VW. He had a unique problem: Porsche had cash reserves worth more than ?3 billion ($4.2 billion), which he would otherwise have had to distribute to the shareholders. He also anticipated trouble ahead for Porsche, because the company was too small to be able to continue developing new technologies on its own.
The families probably would have been willing to merge their two companies into the VW Group, in return for a stake in the giant Wolfsburg carmaker. But then Porsche's chief financial officer, Holger H?rter, appeared on the scene. H?rter is a relatively inconspicuous executive who is often unshaven, reads Kafka and is an avid fan of ice hockey. He was seen as one of the smartest managers in the financial sector.
H?rter, together with investment bankers, had developed a complex model under which Porsche, with its ?3 billion ($4.2 billion) in cash, additional loans and options, would acquire a stake in VW. The scheme, a masterpiece of investment banking, would even allow the families to keep their sports car company in Stuttgart and the dealership in Salzburg.
For Wiedeking, the VW adventure represented the beginning of the third phase of his tenure as the head of Porsche. The erstwhile David had turned into a Goliath. Nevertheless, Wiedeking's rhetoric hadn't changed, and he continued to rail against corporate raiders who would take over companies and drain their cash reserves to recoup their investments. Ironically, he then applied the same strategy to VW.
The Porsche CEO was convinced that he was reaching the high point of his career. In truth, however, Porsche's attempted takeover of VW would mean his downfall -- even if it was to make him the highest-paid corporate executive in Germany.
Taking on the Sacred Cows
Once a year, Wiedeking would invite members of the press to so-called editor-in-chief meetings -- secretive, behind-the-scenes gatherings in restaurants. Nevertheless, the group was always large enough to ensure that many of Wiedeking's statements, even if they were made at the bar at 3 a.m., reached the public.
He complained bitterly about VW's forays into the luxury segment, including Bentley, Bugatti and the Phaeton -- all of them developments for which Ferdinand Pi?ch was partly responsible. He was critical of the "sacred cows" in Wolfsburg, which included, for example, the company wage agreement. He was also quick to brag, in a poorly concealed way, about his own compensation. "We don't publish board members' salaries," Wiedeking said. "Germany couldn't bear it."
At this point, Pi?ch finally distanced himself from his top employee. He feared that Wiedeking would become a liability for a combined VW-Porsche group, that the Porsche CEO's abrasive manner could soon turn friendly companies into enemies and that the powerful IG Metall union would not stand for his neo-liberal rhetoric. As he had often done before, Pi?ch used a small act of malice to show his aversion to Wiedeking. At the VW Group's annual meeting, Pi?ch, as chair of the meeting, referred to the Porsche CEO as "Herr Dr. Wedeking" -- and not just once, but several times.
The Rise of WoPo
By then, however, another member of the clan had assumed a key position: Wolfgang Porsche, nicknamed WoPo. Before that, his public appearances had been limited to the parties he and his second wife, a film producer, attended. Nevertheless, he had been a member of the Porsche supervisory board since 1978 and, in 2007, assumed the chairmanship.
Porsche, who moved into his father's office in Zuffenhausen, likes to tell visitors that the desk, chairs and lamps have been there since the days of Ferry Porsche. The automobile designer's original wrenches and screwdrivers, compasses and stencils are still in a drawer in one of the cabinets, carefully sorted by size.
An economist by profession, Wolfgang Porsche worked at the German car company Daimler for five years. He imported Yamaha motorcycles and had clear ideas about how to run a company. He was opposed to developing cars at VW that garnered prestige but were unprofitable. On that subject, he agreed with Porsche boss Wiedeking. And he asked: "Why does VW need a Phaeton when Audi already has an A8?"
The world of the VW Group was foreign to Wolfgang Porsche. For the Porsche scion, the notion that the works council in Wolfsburg was so powerful, and that VW's head of human resources, Horst Neumann, was even a member of IG Metall, represented a parallel universe to his dynamic world at Porsche.
He had said as much many times to his cousin Ferdinand Pi?ch, who assumed the chairmanship of the Volkswagen supervisory board after stepping down as CEO of VW. "I always tell him everything," he says, "even though it doesn't always do any good."
Using the Power Structures
Even so, many at Porsche and VW were now paying attention to what WoPo had to say. And when he said in an interview that VW workers ought to return to the assembly lines instead of striking, he didn't have to wait long before hearing a loud response from the works council in Wolfsburg.
While his cousin Pi?ch was intimately familiar with, and knew how to use, the power structures in Wolfsburg, Wolfgang Porsche was content to keep his distance. He long refused to meet with Bernd Osterloh, the head of the VW works council. He argued that Osterloh ought to meet with his counterpart at Porsche, Uwe H?ck, instead, saying that this was the appropriate level for discussions. Executives in Wolfsburg became increasingly irritated over Porsche's perceived arrogance.
The image Wolfgang Porsche had of the VW Group was very similar to Wiedeking's. Both men saw VW as a company where money had been wasted on luxury models and where the works councils had excessive claims to power. They were determined that this would change when Porsche became a majority shareholder in VW. This alone prompted Wolfgang Porsche to defend Wiedeking against all attacks from then on.
But back then, the fact that Wolfgang Porsche had Wiedeking to thank for his now being in a position he had never occupied before may also have played a role. He had become the Herr Porsche and part owner of the giant VW Group.
Formally, Wolfgang Porsche now held the most important position within the clan. Because his branch of the family owned more shares in Porsche Automobil Holding, he was the chairman of its supervisory board. The board included three representatives of the Porsche family, but only two Pi?chs.
Pi?ch's Crafty Chess Game
At that point, in the spring of 2008, Ferdinand Pi?ch seemed to have lost his power. He was still the chairman of VW's supervisory board, but the more shares in VW that Porsche acquired, the stronger was the Stuttgart executives' influence on the Wolfsburg-based automaker. And Wiedeking continued to buy more and more VW shares.
The VW board would have been forced into a subordinate position if Porsche had managed to conclude a so-called control agreement with Volkswagen. This would have allowed Porsche to simply ransack VW's financial reserves, thereby forcing VW to partially pay for its own sale.
Only two conditions had to be met to conclude such an agreement. First, Porsche needed 75 percent of the VW shares. Second, the so-called "VW Law" had to go. The law provides the state of Lower Saxony, which owns part of VW, with a blocking minority and, therefore, an eternal veto. It seemed that both problems could be solved, but then Ferdinand Pi?ch demonstrated his mastery of the art of the power struggle. He had already survived scandals that would certainly have cost others their jobs. One was the Lopez case, in which Jos? Ignacio L?pez, a General Motors purchasing executive, had defected to VW, bringing secret documents with him to Wolfsburg. Another was a scandal over payments for lavish foreign trips and prostitutes for VW labor representatives.
Pi?ch initially sought allies in the new conflict, and he found them in the VW works council and Lower Saxony Governor Christian Wulff. He did not allow his choices of allies to be guided by his emotions, however. Theoretically he should have borne a grudge against Wulff, who had tried to replace Pi?ch on the Wolfsburg supervisory board shortly after Porsche acquired its stake in VW.
Pi?ch's wife Ursula, who accompanied her Ferdinand to auto shows and company meetings alike, helped smooth out the relationship with Pi?ch's former enemy. She even asked Wulff to write something on her plaster cast after injuring her arm. When Wulff was named an honorary senator in Salzburg, the Pi?chs were among the guests at the ceremony. Pi?ch and Wulff had a reconciliation and were allies from then on.
A Decisive Dinner
On April 15, 2008, Wulff met with Chancellor Angela Merkel at Sale e Pepe, a small Italian restaurant in Berlin's Charlottenburg district. Their conversation would prove to be critical to subsequent developments in the power struggle between Porsche and VW. If the European Commission had overturned the VW Law, as it intended to do, Porsche would have had free rein in Wolfsburg. But on that evening, Wulff managed to win over the chancellor. After that, she made sure that Lower Saxony would keep its blocking minority, even with an amended VW Law.
The first moves in Pi?ch's chess game became visible. His next step was to limit Porsche's power in the VW Group. A committee comprised of members of the Wolfsburg supervisory board was to approve all transactions with Porsche in the future. Pi?ch did not attend the meeting at which a vote was to be taken on the measure. Instead, he submitted his vote in writing. It was an abstention. This gave the 10 labor representatives and Governor Wulff the majority.
Wiedeking and Wolfgang Porsche were taken completely by surprise, and they were furious. Pi?ch had not informed them in advance.
But the great strategist had gone too far. His cousin, Wolfgang Porsche, was "appalled," and his own brother, Hans Michel Pi?ch, normally a levelheaded attorney, distanced himself from Ferdinand Pi?ch. Some members of the family planned a coup, hoping to unseat Pi?ch as their representative on the VW supervisory board. They were tired of being made to look like fools by Ferdinand. Pi?ch played for time.
He failed to appear at a scheduled family meeting, and he later told his relatives that there had been no malicious plan behind his voting behavior. He assured them that he supported the efforts to bring Porsche and VW closer together.
The planned mutiny fell apart before it could even begin. Most members of the clan were more interested in collecting their dividend and being left in peace. They were no match for Ferdinand Pi?ch, 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 Pi?ch'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. H?rter, 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 Pi?ch 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, Pi?ch 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," Pi?ch said, going from all-powerful boss to a "more humble" position.
Later, Ursula Pi?ch 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 Pi?ch 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 H?ck 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 Pi?ch 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 Pi?chs 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-Pi?ch 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 Pi?ch 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
Volkswagen looks set to acquire Porsche, the troubled German sports car manufacturer. At the core of the companies' tightly intertwined histories is a deeply divided family engaged in a power struggle worth billions -- and which could determine the fate of two of Germany's most famous carmakers. Ferdinand Pi?ch, shown here, is chairman of the VW supervisory board and the head of the Pi?ch family.
Porsche AG CEO Wendelin Wiedeking is seen arriving at an event to celebrate the 100-year anniversary of Audi on July 16. According to information obtained by SPIEGEL, the families who own Porsche have decided to part ways with the chief executive, who is largely blamed for Porsche's bungled takeover of VW. The terms of his departure are currently being negotiated.
Wolfgang Porsche (right) gestures to his cousin Ferdinand Piech during the annual shareholders meeting of Volkswagen AG on April 23. Wolfgang Porsche is the supervisory board chairman of both Porsche Automobil Holding and Porsche AG.
Another member of the Porsche clan: Hans-Peter Porsche is the brother of Wolfgang Porsche.
From left: Volkswagen CEO Martin Winterkorn, his wife Anita Winterkorn, Lower Saxony Governor Christian Wulff, Ursula Pi?ch and Ferdinand Pi?ch. Lower Saxony owns just over 20 percent of Volkswagen.
Car designer Ferdinand Porsche (1875 - 1951) was awarded the contract to produce the Volkswagen Beetle after his design for a "people's car" was chosen by Nazi dictator Adolf Hitler. Porsche was apparently more interested in technical challenges than in the question of who he was working for.
One of them is a Golf with a different bodywork, the other one is a purpose built mid-engined sportscar.
At this time of year? My exams were done at the end of May, and we don't start until the middle of August. Anyway, summer school is a bother...
