Ferdinand Piëch hasn't seemed this relaxed and pleased in a long time. It's the VW Group's evening at the Geneva Auto Show, and Piëch is sitting in the first row as the cars roll in on the stage in front of him. They include a 200-horsepower VW Scirocco, a 500-horsepower Audi R8 V12 TDI, a 530-horsepower Bentley Brooklands, a 560-horsepower Lamborghini Gallardo and a 1,001-horsepower Bugatti Veyron. Piëch is beaming, almost as if his 12 children were marching across the stage.
This is his world, and these are his cars. Most of all, this is his company, or at least part of it is. And this Monday, March 3, is his day.
Just that morning in Stockholm, VW had acquired the majority of voting rights in Swedish truck manufacturer Scania. The VW Group now has something that Piëch has been pursuing for close to a decade: a product line ranging from small cars to luxury sedans to 40-ton trucks. That afternoon, Porsche announced in Stuttgart that it was acquiring the majority of the VW Group.
Piëch is pleasant and friendly, even to those with the most annoying questions. He remains at the event until midnight, making one thing clear to everyone: that the deal is done.
A new automotive giant has been created. It includes eight car brands (Porsche, SEAT, Skoda, VW, Audi, Lamborghini, Bentley and Bugatti) and holdings in Scania and German truckmaker MAN. It is now the world's fourth-largest automotive group. And all of this is now headed by the Porsche and Piëch families, which hold all common stock in Porsche and thus control the new empire.
But it isn't easy to keep up this façade of domestic bliss, not even for an evening. It quickly becomes obvious that the new horsepower empire is more like a warzone than a cozy family living room at the moment. Piëch's supposed one-man show is everything but a solo effort. In fact, it's a place where everyone is fighting everyone else. The situation on the battlefield is confusing, and the outcome of the power struggle is completely open.
First, labor representatives at VW and Porsche are arguing over how many seats they should hold on the supervisory board and works council of the new auto company. Meanwhile, Bernd Osterloh, the chairman of the VW works council, is firing off shots at Porsche CEO Wendelin Wiedeking. Porsche co-owner Piëch has also taken up a position against Wiedeking. Insiders say that Piëch is even considering ousting Wiedeking as head of the Porsche unit.
Piëch's cousin Wolfgang Porsche and his family, for their part, are defending the Porsche CEO, leading to clashes between the two families of owners, the Porsches and Piëchs. At VW, it seems, there is trouble at every level: among employees, in management and in the two clans.
The disputes revolve around animosities, influence and power, but also around the direction which the new auto giant will take in the future.
Should it focus on building exciting cars and make profits a secondary concern? This would be roughly the approach favored by the company's works council (which represents the interests of employees), Chairman Ferdinand Piëch, who is an enthusiastic automobile engineer and VW CEO Martin Winterkorn.
Or should the group seek high returns and, to this end, build decent cars? This is the position taken by Porsche CEO Wiedeking and the Porsche family.
Piëch and Winterkorn set the tone at the VW reception in Geneva. The VW CEO had flown to Sweden that morning to inform senior executives and employee representatives at Scania that VW had bought the majority of shares in the Swedish truckmaker. In several meetings prior to that, Winterkorn had managed to convince the Swedes that they would be driving into a safe future with VW.
That evening in Geneva, Winterkorn reiterated: "The people are what's important in a takeover," and that losing the people means losing the company. "It's all about the people," he said.
He was talking about VW and Scania, but it sounded like an attack on Porsche. If there is anything that can be held against the sports car maker based in Stuttgart's Zuffenhausen district, it is that Porsche, when it acquired a major stake in VW, did not take people sufficiently into account -- from labor representatives to senior executives.
The manner in which Porsche CEO Wiedeking began firing off questions at VW managers after becoming a member of its supervisory board was far from appreciated at VW headquarters in the north central German city of Wolfsburg. According to one member of the VW board, Wiedeking treated them like schoolboys at board meetings.
Although Winterkorn has not criticized Wiedeking openly, the head of VW has made no secret of his conviction that things will have to change within the new group's top management board. Wiedeking heads the Porsche division and Chief Financial Officer Holger Härter is his deputy. But Winterkorn and another executive, who runs the truck business, ought to be represented on the Porsche board. Ought to be.
Arrangements like this are a source of friction within VW management. To Wolfburg executives, it seems obsious that VW should assume the leadership role -- with Porsche serving as its eighth car brand. But the VW-Porsche deal isn't even a merger between equals, like the former alliance between Daimler and Chrysler. From the standpoint of executives in Wolfsburg, things are far worse: Porsche, a small company, has taken over the big VW Group. The tail has the audacity to wag the dog.
In this situation, the Porsche CEO would be well advised to exercise discretion. Wiedeking has many strengths, but sensitivity in dealing with managers is not one of them.
Meanwhile, VW board members have a tendency to overlook the fact that the deal was only possible because VW, as a company with sagging profits, was a cheap buy, while Porsche, as the world's most profitable carmaker, had no difficulty securing the financing for the takeover. VW management itself is responsible for the situation in which it now finds itself. Nevertheless, everyone in Wolfsburg has bristled at the new pecking order.
Piëch's Gripe with Wiedeking
At times VW executives have trouble concealing from outsiders how poorly they have managed to deal with the situation. Winterkorn was caught off guard in Geneva when a journalist asked him how long Wiedeking could remain the CEO of the Porsche holding company.
Winterkorn responded: "Don't ask me, ask him." He was pointing at VW Works Council Chairman Osterloh, who was standing next to him. Was it a joke? Or would the VW CEO truly entrust his works council chairman in Wolfsburg to have a say in Wiedeking's tenure as head of Porsche?
For weeks, Osterloh has attracted attention by criticizing Wiedeking more sharply than any other executive before him. He calls Wiedeking a "Napoleon" who has yet to face his Waterloo. He says that the takeover couldn't have been handled more poorly. He complains that Porsche's entry into the Volkswagen Group is turning into a "hostile takeover."
Normally Osterloh is anything but a hothead. He approved moderate labor agreements that included extended working hours. But he currently seems to enjoy playing the role of agitator.
For this reason, he must face accusations that he is doing more than his job of championing the interests of employees by fighting for the VW CEO and Supervisory Board Chairman Piëch. In Geneva, Osterloh responded to the charges in his own way -- with pure irony. When he was standing at the VW booth, drinking a cup of coffee, Piëch walked over and Osterloh said to the supervisory board chairman: "Mr. Piëch, I was told to have you give me my orders for the day." "Oh, Mr. Osterloh," Piëch replied, grinning, "you're so intelligent that you'll know what to do."
Piëch has always said that one cannot run a company by fighting with its employees. Osterloh, with his personal attacks on Wiedeking, could provide Piëch with the ammunition he needs to fire at the Porsche CEO. If Wiedeking is unable to get along with VW's labor representatives, and if a company, as Piëch believes, is the sum of its employees, then Wiedeking would be the wrong man to run the new automotive giant.
One cannot help but suspect that Osterloh is launching his attacks on Wiedeking with the tacit support of VW management and the head of its supervisory board. There are still some unresolved issues in the dispute over codetermination in the holding company.
It is clear that Wiedeking unnecessarily provoked the labor representatives in Wolfsburg by saying, for example, that there would be "no holy cows" in the future. The labor representatives interpreted this as an attack on their internal wage agreement.
But none of this explains the sharpness of the attacks on Wiedeking. It is also noticeable that Piëch and Winterkorn have not distanced themselves from Osterloh's constant attacks on the Porsche CEO. They could have tried to muzzle Osterloh. But the two men see no reason to intervene.
In fact, Piëch has also voiced clear criticism of Wiedeking, but not publicly. When speaking with close associates, he usually mentions three things that he dislikes about the Porsche CEO.
It began with the planned replacement of former VW CEO Bernd Pischetsrieder in the spring of 2006. At the time Wiedeking, together with Christian Wulff, the governor of the state of Lower Saxony (where Wolfsburg is located), joined forces on the VW supervisory board to extend Pischetsrieder's contract. From the standpoint of Piëch, who wanted to get rid of Pischetsrieder, Wiedeking had stabbed him in the back -- a snub that a man like Piëch never forgets.
Piëch's second gripe with the Porsche CEO is that Wiedeking, by making critical remarks about VW's Phaeton luxury sedan and its Bugatti and SEAT subsidiaries, questioned the group's models and brands -- a stance that isn't exactly good for sales. Besides, Piëch disagrees with Wiedeking's assessment: "Anyone who says that VW should pull the Phaeton doesn't understand the world." The luxury segment, says Piëch, is the only segment that still promises double-digit growth.
Finally, Piëch resents Wiedeking for not having sat down with Osterloh earlier and resolved their differences. Piëch doesn't express any of this criticism publicly, merely saying: "But there isn't anything to criticize about Mr. Wiedeking."
'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.