Porsche Clan Drama Dispute Pits Volkswagen Chief against Family

Ferdinand Piech, the master of the power play, is starting to feel the pressure himself, as members of the powerful Porsche clan are looking for ways to replace him as head of Volkswagen's supervisory board.

Over the years, Ferdinand Piech has been behind quite a few surprises. But the surprise he served up late last week was different. The chairman of VW's supervisory board and co-owner of Porsche suddenly disappeared from the scene, and he even allowed a senior union official to speak -- and vote -- on his behalf.

The Porsche-Piech clan has been in such an uproar over the absurd drama that some are even mobilizing against their own relative. It is the latest major episode in the economic thriller that has been playing out on four fronts ever since Stuttgart-based Porsche took over the much larger VW Group.

At the lowest rung of the crisis, the two powerful labor representatives at each of the companies are eyeing each other with suspicion. Management is ruled by jealousies and power struggles reaching all the way up to Porsche CEO Wendelin Wiedeking and his counterpart at VW's headquarters in Wolfsburg, Martin Winterkorn. Audi and Porsche, which are natural competitors in the marketplace but now sister companies, are also at odds.

And at the very top, there is one man facing off against everyone else: Ferdinand Piech. Piech wants to get rid of Wiedeking and return VW to its former position of power. And it's probably also the case that Piech is simply unwilling to let the Porsche CEO dictate to him what his line of cars in Wolfsburg should look like. Rarely do such problems revolve "merely" around billions. In most cases, egos are also at stake.

A Strategic Absence

The most recent drama began last Thursday, at 5:50 p.m., at the Hotel Ritz-Carlton in Wolfsburg, where VW's top managers had convened for an executive meeting. But instead of including the supervisory board chairman in person, a member of his staff appeared and announced that Piech would not be attending the meeting. As a result, it was his protégé, VW Chairman Martin Winterkorn, who first came under fire. Winterkorn was forced to listen to Wolfgang Porsche accuse him of provoking the conflict with Porsche, a major stakeholder in the company.

But there had already been a meeting on Sept. 4 between Winterkorn, VW board member Horst Neumann and Porsche executives Wiedeking and Holger Härter. The four of them reportedly agreed that decisions on brand and model strategy could only be made if a consenus of the executive boards of both VW and Porsche was reached. A joint statement had even been in the works. But Winterkorn reportedly rejected the agreement and, a short time later, stirred up the conflict even further.

The head of VW retaliated, saying that most questions had remained unanswered and that the mood was especially uncertain at the Audi subsidiary. In light of the dispute, Jürgen Großmann, the head of electric utility RWE and a member of the VW supervisory board, told the Porsche executives: "You don't understand the business over here."

Putting the many minor pinpricks and major clashes aside, the central issue is one of power within the new Porsche-VW Group. The VW management refuses to subjugate itself to the new owners, and they are unwilling to yield their authority. To make matters worse, the dispute between Ferdinand Piech and the rest of the Porsche-Piech clan is now escalating.

After Piech did not attend a meeting of the families two weeks ago, those who were there decided to submit a written request to him to vote on their behalf at the upcoming meeting of the VW supervisory board. Most of all, they wanted him to vote against a motion by the VW shop council. The goal of the motion was to require that future joint projects between Porsche and Audi be approved by the VW shop council, which would further complicate cooperation between the two companies.

At first, Piech left the request unanswered. When the supervisory board meeting began on Friday, Piech was missing once again -- yet he was present in a way that displeased many. He had given VW supervisory board member Jürgen Peters, who is also the chairman of IG-Metall trade union, authorization to vote on his behalf. It was an odd choice, given the fact that, on that very day, Peters' union had called upon more than 30,000 VW workers to protest against the abolition of the1960 VW Law -- which restricts individual shareholders to a 20-percent portion in voting rights, regardless of how much they own -- and its major shareholder Porsche!

When the VW labor representative's petition came up for a vote, nine shareholder representatives voted against it. When Peters cast Piech's written vote of abstention, however, Piech ensured that the 10 labor representatives achieved a majority. This pits Piech, an Austrian, against everyone else. Even his brother, Hans Michel Piech, is believed to be furious with him. Wolfgang Porsche is "outraged," and clan members are even looking into whether they should or can remove Piëch from his position as chairman of the VW supervisory board.

A Family's Revenge

Some are convinced that the master of the power play has gone too far this time. Others wonder why Piech would have sought an escalation from which he can hardly emerge as a winner. On the other hand, his ouster would have to be supported by VW's second major shareholder, the state of Lower Saxony. Its premier, Christian Wulff, a member of the conservative Christian Democratic Union (CDU) and once a sharp critic of Piech, will likely pull his punches.

Wulff also feels the need for a clear plan for how Porsche intends to run VW. The crisis of confidence between VW and Porsche, says Wulff, cannot be resolved by replacing people. But if not that way, how?

Translated from the German by Christopher Sultan

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