Porsche boss Wiedeking leaves to pave way for Volkswagen
Porsche SE Chief Executive Officer Wendelin Wiedeking will step down after 16 years, paving the way for a merger between the 911 sports-car maker and Volkswagen AG.
Wiedeking, 56, as well as Chief Financial Officer Holger Haerter will leave with immediate effect, Stuttgart-based Porsche said in a statement distributed over the DGAP newswire today.
Wiedeking had opposed selling Porsche’s automotive unit to VW, Europe’s largest carmaker. Instead he engineered a strategy of accumulating Volkswagen shares, raising Porsche’s stake in VW to more than 50 percent this year excluding options that could be converted into an additional 20 percent holding. The swoop for VW also boosted Porsche’s debt to 10 billion euros ($14.2 billion), forcing the CEO to turn towards the company’s owners for capital and to court Qatar for an investment.
“Wiedeking’s course has split the families and caused major irritations in Porsche’s working ties with VW,” said Stefan Bratzel, head of the Center of Automotive Research Institute in Bergisch Gladbach, Germany. “Wiedeking has no place in a combined VW-Porsche carmaker.”
Wiedeking’s salary contract stipulates that he earns 0.9 percent of Porsche’s pretax profit, according to the company. Based on the 8.57 billion-euro pretax income reported for the year through July 2008, the CEO received about 77 million euros, making him better paid than any leader of the 30 companies in Germany’s benchmark DAX Index, which includes VW and not Porsche.
Overnight Showdown
Wiedeking’s departure was announced after a meeting of Porsche’s supervisory board. At the same gathering, directors supported Porsche’s plan for a capital increase of at least 5 billion euros, and a proposal to negotiate an investment by a Qatar investment fund, Porsche said.
Volkswagen’s own supervisory board is scheduled to meet at noon in Stuttgart and will likely confirm its commitment to combine with Porsche, making Porsche one of VW’s 10 brands, a person familiar with the talks said.
“Porsche’s myth must continue to be visible in an integrated company,” Guenther Oettinger, prime minister of the state of Baden-Wuerttemberg, where Porsche is based, told Germany’s ARD television network.
Wiedeking transformed Porsche, almost bankrupt when he took over as CEO in August 1993, into the automaker with the highest profit margins for the industry. In 2005, he began using cash from the luxury-vehicle business to acquire shares of VW, a company that builds more cars in a week than Porsche does in a year.
Goliath Wins
The David-bests-Goliath tactics worked until Wiedeking’s efforts to topple power structures at VW failed and the economic crisis thinned profits and spooked banks.
Wiedeking and Haerter see their departure “as a significant contribution to the appeasement of the situation and to support the forming of an integrated car manufacturing company,” Porsche said today. “Both gentlemen will accompany the handover at the board of management level positively and support their respective successor in their tasks.”
Wiedeking will be followed by Michael Macht, head of production. The 48-year-old Macht joined Porsche in 1990 and joined the company’s executive board in 1998. Macht graduated from the Stuttgart Technical College in 1986 with a degree in mechanical engineering. Thomas Edig, board member in charge of human resources, will become Macht’s deputy.
Volkswagen Law
The CEO fell short of winning support from VW union chief Bernd Osterloh, who asked to quit negotiations with Porsche only two weeks after a May 6 agreement among the families. He also alienated Christian Wulff, the premier of VW’s home state of Lower Saxony, by trying to scuttle Germany’s so-called Volkswagen Law, which gives the state a blocking minority.
The resistance from Lower Saxony prevented Porsche from realizing its plan to acquire 75 percent of Volkswagen, a holding that could have given it access to VW’s cash.
Wiedeking, who’s spent all but five of his 26 years in the auto industry with Porsche, also butted heads with Ferdinand Piech, Volkswagen’s chairman and a member of the clan that controls Porsche.
In September 2007, the Porsche CEO said there would be no “sacred cows” after Porsche takes over VW, suggesting he may seek to unravel some of the legacy of Piech, VW’s CEO until 2002.
Piech in Sardinia
In May, with merger talks between Porsche and VW in their early stages, Piech made a rare public appearance at a Volkswagen event in Sardinia and openly criticized Wiedeking and Porsche Chief Financial Officer Holger Haerter for creating Porsche’s problems. He said at the time that Wiedeking had his support “for the time being.”
“I’m the chief executive officer,” Wiedeking said July 16 in Ingolstadt, Germany, where he was attending the 100th anniversary celebration for VW’s Audi division. “I bear responsibility for this company and I’m feeling happy as a cat in that role.”
When Wiedeking took the helm in 1993, Porsche posted a net loss of 122 million euros on sales of 978 million euros. Last year, profit was 6.29 billion euros, boosted by gains from the VW options, while sales reached to 7.47 billion euros.
Porsche, which has made more money on every car it sells than any other automaker since at least 2002, generated an operating margin of 13 percent last year, compared with 1.5 percent at BMW AG and VW’s 5.9 percent, data compiled by Bloomberg show.
Learning From Japan
Wiedeking streamlined production with the help of experts from Toyota Motor Corp. to have components delivered on time and in the order of assembly. He focused Porsche on the iconic 911 sports car and then added the Boxster roadster in 1996 and Cayenne sport-utility vehicle in 2002 to broaden the brand’s appeal. The costs were kept low by outsourcing Boxster production to Valmet Corp. in Finland and partnering with Volkswagen on development and parts for the Cayenne.
Wiedeking, with the aid of CFO Haerter, backed his swoop for Volkswagen with share options that allowed Porsche to profit from increases in VW’s share price. The gains were so robust that profits of 5.62 billion euros exceeded sales of 3.04 billion euros in the six months ended Jan. 31.
While the options were a coup for Porsche, they created animosity in the financial community, contributing to Porsche’s difficulties to renew a 10 billion-euro credit line this year.
Source: Bloomberg