Porsche on Thursday fired Wendelin Wiedeking, the high-profile chief executive who rejuvenated the nearly bankrupt sports car maker in the early 1990s but stumbled as a massive debt load torpedoed plans to take over the much larger Volkswagen concern, which will now absorb Porsche itself.
Following an all-night meeting of its supervisory board in Stuttgart, Porsche also green-lighted plans for the new chief executive, Michael Macht, to finalize an investment by the government of Qatar as a prelude to the create of an integrated automobile company that will make Porsche the 10th brand in Volkwagen’s stable.
Mr. Wiedeking, a hyper-aggressive manager who ruffled feathers for years as Germany’s best-paid executive but 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-owns Porsche ended that cherished dream.
“The merger with Volkwagen 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 fall, 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 drag out for some time, analysts said.
Porsche’s board approved a €5 billion capital increase and said that the “ultimate goal” is 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, would 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 marked a tumultuous end for one of Germany’s most colorful chief executives, and one who anticipated the auto industry’s current troubles worldwide.
He was constantly in the news in Germany, not the least because he was last year the country’s best-paid chief executive, at €77.4 million. His contract guaranteed him 0.9 percent of the company’s profits, and in the last few years they were greater than any could have guessed when the provision was granted in the early 1990s.
Porsche said Thursday that Mr. Wiedeking will walk away with a €50 million severance package, only days after rumors suggested the number might be four times that. Mindful of the public outrage that often explodes over executive compensation, Mr. Wiedeking announced after his dismissal that he would put €25 million in to a charitable trust that would promote “socially fair development” at Porsche facilities, and €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 famously destroying a bin for extra parts along its assembly line to make his point about the need for leaner production processes.
Coped 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 evangelizing Porsche suppliers on 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 massive investments in new technologies that environmental regulations and energy-saving imperatives would demand.
Sergio Marchionne, the chief executive of Fiat, would later echo this sentiment by saying automakers of the future needed to produce at least 5 million vehicles per year, far less than Porsche’s sales last year of fewer than 1 million.
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. And Ferdiand Piëch, a member of Porsche’s 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 a company on its way into the arms of VW – and Mr. Piëch.
“They would never find places in VW,” said Mr. Dudenhöffer of the Center for Automotive Studies. “It is a company built around other people.”
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23rd July 2009, 17:26
