Marital Woes: Takeover Battle Leaves Open Wounds at Volkswagen and Porsche

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The plan has met with opposition. The Norwegian sovereign wealth fund Norges Bank Investment Management and the British Hermes pension fund have sent letters of protest to Ferdinand Piëch, chairman of VW's supervisory board. They feel poorly informed and suspect that Volkswagen is giving preference to the Porsche owner families and is sending too much money their way. They want to know why VW intends to pay €12.4 billion for Porsche AG and acquire the Porsche Holding car dealership in Salzburg from the families for €3.55 billion.

VW CFO Pötsch says that he had several appraisals performed to verify the price for Porsche and the car dealership. There is no doubt in Pötsch's mind that the sports car manufacturer is a real gem, and he also insists that the Salzburg dealership is very profitable. "They have excellent management and a great IT system," says Pötsch, "and they represent a substantial asset for the VW Group."

But not everyone is convinced, not even on the VW supervisory board. Board members Roland Oetker of the German private investors' association DSW and Jürgen Grossmann, the CEO of energy supplier RWE, voted against the planned €16 billion deal. But their objections failed to block the planned Porsche takeover within the supervisory board, and the Norwegian sovereign wealth fund and Hermes are unlikely to do so at the shareholders' meeting. Those in favor of a merger of Porsche and VW have a secure majority of votes.

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VW CEO Winterkorn will be delighted when the event is over. In recent months, he has had far too little time to devote his attention to the new models on which the company's future hinges. Even though VW has weathered the economic crisis more effectively than competitors BMW and Daimler, not everything is going well in Wolfsburg.

The VW subsidiary SEAT, for example, is in the red. The Spanish brand is only strong in South America, and it lacks a strategy for becoming profitable.

Audi is VW's most successful subsidiary. However, almost all of Audi's most profitable models were developed by Winterkorn, who was CEO of the company until 2007. VW executives are now critical of Audi for not developing enough new products.

And now Porsche is also part of the mix. VW executives question whether the new subsidiary is well equipped for the future. They criticize the Panamera, a four-door coupe that has been on the market for a few months now, and the new Cayenne SUV, which it is hoped will boost sales next year, for being potentially too big and too heavy and having poor fuel efficiency.

VW would like to see Porsche's product line expanded to include two models: a roadster and a smaller SUV. Porsche developers are already hoping that they will be permitted to spend more money on innovation in the future. In the past, the engineers were forced to look on as their former boss, Wiedeking, cancelled some of their projects because he felt that the expected returns were insufficient.

Continuing Paralysis

Nevertheless, most Porsche executives are not yet willing to commit themselves to the company's new owners in Wolfsburg, preferring to take a wait-and-see approach. "Almost nothing is being decided," says one Porsche executive, "but we can't afford to let this paralysis continue for very long."

Wiedeking's successor, Macht, has been busy negotiating contracts with VW, but now he plans to pay more attention to the actual business side of things. He will no longer tolerate the kind of sabotage he experienced at last Wednesday's event.

Two hours after Macht had presented the financial statement to journalists last Wednesday, he presented it to the analysts. Once again, VW CEO Winterkorn was sitting next to him. And, once again, Macht was discussing his brand's quality ratings. This time, however, no one displayed the chart that shows Porsche's future sister companies, Audi and VW, bringing up the rear.

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• Part 1: Takeover Battle Leaves Open Wounds at Volkswagen and Porsche
• Part 2: Nagging Doubts about Merger