The Porsche Story The Downfall of a Corporate Upstart

Part 2: 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 Härter, appeared on the scene. Härter 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.

Härter, 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 Piëch 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."

Graphic: VW and Porsche in figures
DER SPIEGEL

Graphic: VW and Porsche in figures

At this point, Piëch 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, Piëch used a small act of malice to show his aversion to Wiedeking. At the VW Group's annual meeting, Piëch, 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 Piëch, 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 Piëch 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 Hück, 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 Piëchs.

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