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  The Culture War: Clans, Executives Sharpen Knives Backstage at Porsche and VW

The Culture War Clans, Executives Sharpen Knives Backstage at Porsche and VW

By Dietmar Hawranek

Part 3: 'This Is Unacceptable'

His cousin, Wolfgang Porsche, has little use for Piëch's brand of sophisticated irony. Porsche, who holds a doctorate in business, is a reserved man, but attacks on Wiedeking infuriate him -- so much so that he has trouble remaining in his seat at the Porsche booth in Geneva. "This is unacceptable," he says.

The son of Ferry Porsche (who himself is the son of deceased Porsche founder and VW Beetle creator Ferdinand Porsche) is currently the most powerful man, at least formally, in the entire Porsche empire, despite the fact that everyone else believes that no one but Piëch can claim this distinction. Wolfgang Porsche occupies the most important position. He is the chairman of the supervisory board of Porsche Automobil Holding, which in turn holds the shares in the VW Group and the Porsche sports car company.

This position reflects the majority relationships between the Porsche and Piëch families. For a long time, it was considered a safe bet that the Porsche side held 53.7 percent and the Piëch clan 46.3 percent of common stock. But in reality the power structure has long since shifted further in the direction of the Porsche side. Almost unnoticed by the public, Piëch's sister, Louise Daxer-Piëch, who has since died, contributed her shares into a joint company with two Porsche brothers. Her shares, together with those of Ferdinand Alexander Porsche and Gerhard Porsche, are now bundled in a company called Familien Porsche-Daxer-Piëch Beteiligung GmbH. The company has been incorporated since Aug. 27, 2003, and since then the Porsche clan has held 61.895 percent of common stock, while the Piëch branch's holding has dropped to only 38.105 percent. This power shift has remained surprisingly unnoticed by outsiders to this day.

But the shift in ownership is important because it underscores the fact that attacks on Wiedeking are pointless, especially when Wolfgang Porsche says: "All Porsche family members stand firmly behind Wiedeking," and that they would "not permit" his "being harmed."

Wolfgang Porsche already has no appreciation for the criticism of Wiedeking. Both families owe a lot to the Porsche CEO and his CFO Härter. It is through their efforts that they have become one of the world's largest and wealthiest automotive dynasties. The takeover of VW is an unprecedented coup. Porsche has already earned more through VW than it paid for its 31-percent share. Porsche spent €5.8 billion for the shares. But the dividends from VW, appreciation of VW earnings and profits from complex options deals with VW shares have already flushed €6.3 billion into Porsche's coffers. The deal has essentially paid for itself.

Wiedeking has not yet publicly admitted that he made mistakes during the takeover. He wanted to run VW the way he runs Porsche: with a heavy hand and clear words. But he can only hope to run a giant corporation like VW by winning over its key executives and labor representatives.

Now Wiedeking is cultivating a new modesty. When he told his employees about the planned takeover of a majority of VW's shares, he merely said: "We would be well advised to remain grounded and not to seem arrogant," adding that he knew that VW has good and proud employees. "The important thing is to be fair in interacting with colleagues at the VW Group."

In the coming weeks, Wiedeking plans to discuss the future of the automobile group with top management at VW, as well as to attempt to clear up any misunderstandings. Of course, says Wiedeking, he has nothing against a successor to the Phaeton. But the car, like any model, has to make money for the company, he adds. And subsidiary SEAT, he now tells executives, can remain part of the group -- but, once again, the brand, like all others within the group, must turn a profit in the long term.

Wiedeking will even meet with his rival Osterloh before long. The VW works council chairman has already said that Wiedeking can come to Wolfsburg anytime. He might be asked to wait five minutes in the reception area, Osterloh adds, "then we'll drink coffee for two hours and discuss all of our problems."

But the wounds won't heal that quickly. Besides, there is still the grand master of the power struggle, Ferdinand Piëch, who had everyone involved puzzled last week once again.

He transferred his position as president of the supervisory boards of the Porsche holding company and the Porsche sports car company to his brother Hans Michel. Does this mean that Piëch, 70, plans to withdraw? Or did the Porsche family force him out of the inner power circle? Piëch himself says that he merely wanted to "make time for other responsibilities." He will become a member of the supervisory board of subsidiary Audi in two weeks.

The switch could also signal that Piëch does not consider Porsche Automobil Holding to be the most important decision-making body in the new auto empire. It could assume the role of a financial holding company, which distributes money among the brands. Another new holding company that would run the actual automobile business could be placed underneath the financial holding company. And if Piëch has his way, the name of the chairman of this company would not be Wiedeking. But such major restructuring efforts would only be possible with the approval of the Porsche family, which seems unlikely at present. Instead, new tensions appear to be taking shape.

When asked how difficult it is to convince both families to agree to the same direction for the new automobile group, Piëch said: "It's a walk in the park." Then he smiled, sphinx-like, and walked away.