Porsche Chief Wiedeking Will Leave, Paving Way for Merger With ...
July 23 (Bloomberg) -- Porsche SE Chief Executive OfficerWendelin Wiedeking will step down after 16 years, paving the wayfor a merger between the 911 sports-car maker and Volkswagen AG.
Wiedeking, 56, as well as Chief Financial Officer HolgerHaerter will leave with immediate effect, Stuttgart-basedPorsche said in a statement distributed over the DGAP newswiretoday.
Wiedeking opposed selling Porsche’s automotive unit to VW,Europe’s largest carmaker. Instead he accumulated Volkswagenshares, raising Porsche’s stake to more than 50 percent andtaking options on an additional 20 percent. That boostedPorsche’s debt to 10 billion euros ($14.2 billion), forcing theCEO to turn to the company’s family owners, the Piechs andPorsches, for capital and to court Qatar for an investment.
“Wiedeking’s course has split the families and causedmajor irritations in Porsche’s working ties with VW,” saidStefan Bratzel, head of the Center of Automotive ResearchInstitute in Bergisch Gladbach, Germany. “Wiedeking has noplace in a combined VW-Porsche carmaker.”
Wiedeking’s salary contract stipulates that he earns 0.9percent of Porsche’s pretax profit, according to the company.Based on the 8.57 billion-euro pretax income reported for theyear through July 2008, the CEO received about 77 million euros,making him better paid than any leader of the 30 companies inGermany’s benchmark DAX Index, which includes VW and notPorsche.
Overnight Showdown
Wiedeking’s departure was announced after a meeting ofPorsche’s supervisory board. At the same gathering, directorssupported Porsche’s plan for a capital increase of at least 5billion euros, and a proposal to negotiate an investment by aQatar investment fund, Porsche said.
Volkswagen’s own supervisory board is scheduled to meet atnoon in Stuttgart and will likely confirm its commitment tocombine with Porsche, making Porsche one of VW’s 10 brands, aperson familiar with the talks said.
“Porsche’s myth must continue to be visible in anintegrated company,” Guenther Oettinger, prime minister of thestate of Baden-Wuerttemberg, where Porsche is based, toldGermany’s ARD television network.
Wiedeking transformed Porsche, almost bankrupt when he tookover as CEO in August 1993, into the automaker with the highestprofit margins for the industry. In 2005, he began using cashfrom the luxury-vehicle business to acquire shares of VW, acompany that builds more cars in a week than Porsche does in ayear.
Goliath Wins
The David-bests-Goliath tactics worked until Wiedeking’sefforts to topple power structures at VW failed and the economiccrisis thinned profits and spooked banks.
Wiedeking and Haerter see their departure “as asignificant contribution to the appeasement of the situation andto support the forming of an integrated car manufacturingcompany,” Porsche said today. “Both gentlemen will accompanythe handover at the board of management level positively andsupport their respective successor in their tasks.”
Wiedeking will be followed by Michael Macht, head ofproduction. The 48-year-old Macht joined Porsche in 1990 andjoined the company’s executive board in 1998. Macht graduatedfrom the Stuttgart Technical College in 1986 with a degree inmechanical engineering. Thomas Edig, board member in charge ofhuman resources, will become Macht’s deputy.
Volkswagen Law
The CEO fell short of winning support from VW union chiefBernd Osterloh, who asked to quit negotiations with Porsche onlytwo weeks after a May 6 agreement among the families. He alsoalienated Christian Wulff, the premier of VW’s home state ofLower Saxony, by trying to scuttle Germany’s so-calledVolkswagen Law, which gives the state a blocking minority.
The resistance from Lower Saxony prevented Porsche fromrealizing its plan to acquire 75 percent of Volkswagen, aholding that could have given it access to VW’s cash.
Wiedeking, who’s spent all but five of his 26 years in theauto industry with Porsche, also butted heads with FerdinandPiech, Volkswagen’s chairman and a member of the clan thatcontrols Porsche.
In September 2007, the Porsche CEO said there would be no“sacred cows” after Porsche takes over VW, suggesting he mayseek to unravel some of the legacy of Piech, VW’s CEO until2002.
Piech in Sardinia
In May, with merger talks between Porsche and VW in theirearly stages, Piech made a rare public appearance at aVolkswagen event in Sardinia and openly criticized Wiedeking andPorsche Chief Financial Officer Holger Haerter for creatingPorsche’s problems. He said at the time that Wiedeking had hissupport “for the time being.”
“I’m the chief executive officer,” Wiedeking said July 16in Ingolstadt, Germany, where he was attending the 100thanniversary celebration for VW’s Audi division. “I bearresponsibility for this company and I’m feeling happy as a catin that role.”
When Wiedeking took the helm in 1993, Porsche posted a netloss of 122 million euros on sales of 978 million euros. Lastyear, profit was 6.29 billion euros, boosted by gains from theVW options, while sales reached to 7.47 billion euros.
Porsche, which has made more money on every car it sellsthan any other automaker since at least 2002, generated anoperating margin of 13 percent last year, compared with 1.5percent at BMW AG and VW’s 5.9 percent, data compiled byBloomberg show.
Learning From Japan
Wiedeking streamlined production with the help of expertsfrom Toyota Motor Corp. to have components delivered on time andin the order of assembly. He focused Porsche on the iconic 911sports car and then added the Boxster roadster in 1996 andCayenne sport-utility vehicle in 2002 to broaden the brand’sappeal. The costs were kept low by outsourcing Boxsterproduction to Valmet Corp. in Finland and partnering withVolkswagen on development and parts for the Cayenne.
Wiedeking, with the aid of CFO Haerter, backed his swoopfor Volkswagen with share options that allowed Porsche to profitfrom increases in VW’s share price. The gains were so robustthat profits of 5.62 billion euros exceeded sales of 3.04billion euros in the six months ended Jan. 31.
While the options were a coup for Porsche, they createdanimosity in the financial community, contributing to Porsche’sdifficulties to renew a 10 billion-euro credit line this year.
To contact the reporter on this story:Andreas Cremer in Berlin at acremer@bloomberg.net.
Last Updated: July 23, 2009 03:03 EDTSource: Bloomberg
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