Porsche Chief Pays for Overreaching
PARIS — Porsche on Thursday fired Wendelin Wiedeking, the high-profile chief executive who rejuvenated the nearly bankrupt makers of sports cars in the early 1990s but who stumbled as a huge debt load torpedoed plans to take over the much larger Volkswagen concern, which will now absorb Porsche instead.
After an all-night meeting of its supervisory board in Stuttgart, Porsche also green-lighted plans for its new chief executive, Michael Macht, to complete an investment by the government of Qatar as a prelude to the creation of an integrated automobile company that would make Porsche the 10th brand in Volkswagen’s stable.
Later Thursday, the supervisory board of Volkswagen gathered in Stuttgart to give its blessing to the arrangement, which would involve a step-by-step takeover. The larger company will acquire Porsche’s car-building business, while also taking on the Qataris as long-term investors.
Alluding to Audi, the premium brand that Volkswagen turned into a profitable franchise in the United States and elsewhere, the chief executive of Volkswagen, Martin Winterkorn, outlined plans for a Porsche that could rely on the larger company’s economies of scale while protecting its brand in the eyes of its customers.
“We can call on our considerable experience in the integration of proud and successful brands rich in tradition,” Mr. Winterkorn said. “Like Audi today, Porsche can also continue its independent development under the aegis of Volkswagen and preserve its own identity.”
Mr. Wiedeking, a hyper-aggressive manager who ruffled feathers for years as the best-paid executive in Germany but who nonetheless proved his industrial prowess time and again, had been the strongest voice for recapitalizing the company and maintaining Porsche’s independence. But in the end, pressure from Volkswagen and the family that co-owned Porsche ended that cherished dream.
“The merger with Volkswagen is a done-deal now,” said Ferdinand Dudenhöffer, director of the Center for Automotive Studies at the University of Duisburg-Essen.
Holger Härter, Porsche’s chief financial officer, will also leave the company.
Mr. Härter gained notoriety for engineering Porsche’s purchase of VW shares using complex financial derivatives. At one point last autumn, the strategy caught hedge funds and other speculators off guard, leading to an epic squeeze on those investors who had bet VW shares would fall and costing them dearly.
Though Mr. Wiedeking’s departure clears a major hurdle toward some type of merger with Volkswagen, that process could still take time, analysts said.
Porsche’s board approved a €5 billion, or $7.1 billion, capital increase and said that the “ultimate goal” was to create an “integrated car manufacturing company” out of Porsche and Volkswagen. But it did not say that Qatar would subscribe to all of that, leaving open the possibility that Porsche’s founding families, the Porsches and the Piëchs, might also inject fresh cash into the company.
If Volkswagen is going to buy up Porsche’s shares as a prelude to full integration in the larger company, Qatar may simply wait and invest in Volkswagen itself as part of the process, analysts said. “If you have a stake in VW, why take a stake in Porsche as well?” said Arndt Ellinghorst, head of automotive research at Credit Suisse in London. “It makes no sense.”
Mr. Wiedeking’s departure from Porsche was a tumultuous end for one of the most colorful German chief executives and one who anticipated the auto industry’s current troubles worldwide.
He was constantly in the news in Germany, not least because last year he was paid €77.4 million. His contract guaranteed him 0.9 percent of company profit.
Porsche said Thursday that Mr. Wiedeking would walk away with a €50 million severance package. Mindful of the public outrage that often explodes over executive compensation, Mr. Wiedeking announced after his dismissal that he would put €25 million into a charitable trust that would promote “socially fair development” at Porsche facilities and give €500,000 each to three organizations that look after infirm journalists.
Mr. Wiedeking, 56, was able to make such a bold move for Volkswagen because he had whipped Porsche into shape in the 1990s, at one point destroying a bin for extra parts along its assembly line to make a point about the need for leaner production processes.
Borrowed from Japanese automakers, the methods turned Porsche around, and the protégés of Mr. Wiedeking rose in the company. Mr. Macht, who will now succeed Mr. Wiedeking, was the founding head of Porsche Consulting, an enterprise that began by preaching to Porsche suppliers about the need to cut costs.
Nearly four years ago, Porsche snapped up 20 percent of Volkswagen — it now holds slightly over 50 percent — on the theory that only a large company could afford the huge investments in new technologies that environmental regulations and energy-saving imperatives would demand.
But Mr. Wiedeking’s strategy looked rash rather than bold after financial market chaos last year transformed the landscape for heavily indebted companies.
Though its operative business responded flexibly to the sharp drop-off in auto sales, a €9 billion debt load proved unbearable. Ferdinand Piëch, a member of the Porsche founding family, a board member and chairman of Volkswagen, pounced on the opportunity.
Mr. Piëch ratcheted up a public and private campaign to reverse the terms of Porsche’s audacious bid, suggesting that Volkswagen, sitting on an enormous cash pile of its own, could buy Porsche. But he insisted that Mr. Wiedeking would have to go and that Porsche would have to bring in some cash on its own.
However useful they were to Porsche, Mr. Wiedeking and Mr. Härter had outlived their usefulness at the company.
“They would never find places in VW,” said Mr. Dudenhöffer of the Center for Automotive Studies. “It is a company built around other people.”
Chris Nicholson contributed reporting.
PARIS — Porsche on Thursday fired Wendelin Wiedeking, the high-profile chief executive who rejuvenated the nearly bankrupt makers of sports cars in the early 1990s but who stumbled as a huge debt load torpedoed plans to take over the much larger Volkswagen concern, which will now absorb Porsche instead.
After an all-night meeting of its supervisory board in Stuttgart, Porsche also green-lighted plans for its new chief executive, Michael Macht, to complete an investment by the government of Qatar as a prelude to the creation of an integrated automobile company that would make Porsche the 10th brand in Volkswagen’s stable.
Later Thursday, the supervisory board of Volkswagen gathered in Stuttgart to give its blessing to the arrangement, which would involve a step-by-step takeover. The larger company will acquire Porsche’s car-building business, while also taking on the Qataris as long-term investors.
Alluding to Audi, the premium brand that Volkswagen turned into a profitable franchise in the United States and elsewhere, the chief executive of Volkswagen, Martin Winterkorn, outlined plans for a Porsche that could rely on the larger company’s economies of scale while protecting its brand in the eyes of its customers.
“We can call on our considerable experience in the integration of proud and successful brands rich in tradition,” Mr. Winterkorn said. “Like Audi today, Porsche can also continue its independent development under the aegis of Volkswagen and preserve its own identity.”
Mr. Wiedeking, a hyper-aggressive manager who ruffled feathers for years as the best-paid executive in Germany but who nonetheless proved his industrial prowess time and again, had been the strongest voice for recapitalizing the company and maintaining Porsche’s independence. But in the end, pressure from Volkswagen and the family that co-owned Porsche ended that cherished dream.
“The merger with Volkswagen is a done-deal now,” said Ferdinand Dudenhöffer, director of the Center for Automotive Studies at the University of Duisburg-Essen.
Holger Härter, Porsche’s chief financial officer, will also leave the company.
Mr. Härter gained notoriety for engineering Porsche’s purchase of VW shares using complex financial derivatives. At one point last autumn, the strategy caught hedge funds and other speculators off guard, leading to an epic squeeze on those investors who had bet VW shares would fall and costing them dearly.
Though Mr. Wiedeking’s departure clears a major hurdle toward some type of merger with Volkswagen, that process could still take time, analysts said.
Porsche’s board approved a €5 billion, or $7.1 billion, capital increase and said that the “ultimate goal” was to create an “integrated car manufacturing company” out of Porsche and Volkswagen. But it did not say that Qatar would subscribe to all of that, leaving open the possibility that Porsche’s founding families, the Porsches and the Piëchs, might also inject fresh cash into the company.
If Volkswagen is going to buy up Porsche’s shares as a prelude to full integration in the larger company, Qatar may simply wait and invest in Volkswagen itself as part of the process, analysts said. “If you have a stake in VW, why take a stake in Porsche as well?” said Arndt Ellinghorst, head of automotive research at Credit Suisse in London. “It makes no sense.”
Mr. Wiedeking’s departure from Porsche was a tumultuous end for one of the most colorful German chief executives and one who anticipated the auto industry’s current troubles worldwide.
He was constantly in the news in Germany, not least because last year he was paid €77.4 million. His contract guaranteed him 0.9 percent of company profit.
Porsche said Thursday that Mr. Wiedeking would walk away with a €50 million severance package. Mindful of the public outrage that often explodes over executive compensation, Mr. Wiedeking announced after his dismissal that he would put €25 million into a charitable trust that would promote “socially fair development” at Porsche facilities and give €500,000 each to three organizations that look after infirm journalists.
Mr. Wiedeking, 56, was able to make such a bold move for Volkswagen because he had whipped Porsche into shape in the 1990s, at one point destroying a bin for extra parts along its assembly line to make a point about the need for leaner production processes.
Borrowed from Japanese automakers, the methods turned Porsche around, and the protégés of Mr. Wiedeking rose in the company. Mr. Macht, who will now succeed Mr. Wiedeking, was the founding head of Porsche Consulting, an enterprise that began by preaching to Porsche suppliers about the need to cut costs.
Nearly four years ago, Porsche snapped up 20 percent of Volkswagen — it now holds slightly over 50 percent — on the theory that only a large company could afford the huge investments in new technologies that environmental regulations and energy-saving imperatives would demand.
But Mr. Wiedeking’s strategy looked rash rather than bold after financial market chaos last year transformed the landscape for heavily indebted companies.
Though its operative business responded flexibly to the sharp drop-off in auto sales, a €9 billion debt load proved unbearable. Ferdinand Piëch, a member of the Porsche founding family, a board member and chairman of Volkswagen, pounced on the opportunity.
Mr. Piëch ratcheted up a public and private campaign to reverse the terms of Porsche’s audacious bid, suggesting that Volkswagen, sitting on an enormous cash pile of its own, could buy Porsche. But he insisted that Mr. Wiedeking would have to go and that Porsche would have to bring in some cash on its own.
However useful they were to Porsche, Mr. Wiedeking and Mr. Härter had outlived their usefulness at the company.
“They would never find places in VW,” said Mr. Dudenhöffer of the Center for Automotive Studies. “It is a company built around other people.”
Chris Nicholson contributed reporting.
Source: New York Times
« Back to Business News
Related News
-
Porsche Chief Pays in Full for Overreaching Jul 23, 2009 @ 10:00 AM
PARIS — Porsche on Thursday fired Wendelin Wiedeking, the high-profile chief executive who rejuvenated the nearly bankrupt makers of sports cars in the early 1990s but who stumbled as a huge debt load torpedoed plans to take over the much larger Volkswagen concern, which will now absorb Porsche instead.
-
Porsche's Wiedeking May Be Eligible for Three-Year Profit Share Jul 23, 2009 @ 10:00 AM
July 20 (Bloomberg) -- Porsche SE Chief Executive OfficerWendelin Wiedeking, Germany’s best paid manager, may receive ashare of profits for three years even if he has to leavefollowing a power struggle with Volkswagen AG, according to alaw professor.
-
Volkswagen Will Pay $2.5 Billion for 19.9% Stake in Japan's Suzuki Motor Jul 23, 2009 @ 10:00 AM
Dec. 9 (Bloomberg) -- Volkswagen AG, Europe’s largestcarmaker, agreed to buy 19.9 percent of Suzuki Motor Corp. for222.5 billion yen ($2.5 billion) to boost its presence in India.
-
Dubai struggles to assuage debt fear Jul 23, 2009 @ 10:00 AM
DUBAI/LONDON (Reuters) - Dubai struggled to ease fears of debt default on Thursday after its move to delay repayments at two flagship firms shook confidence in the Middle East as a center for investment and a source of capital.
-
Goldman, Buffett Establish $500 Million Small-Business Program Jul 23, 2009 @ 10:00 AM
Nov. 17 (Bloomberg) -- Goldman Sachs Group Inc., under firein Washington for setting aside billions of dollars for bonusesa year after getting a taxpayer bailout, said it’s teaming upwith Warren Buffett to provide assistance to 10,000 smallbusinesses in the U.S.
