Porsche’s Greed is VW’s Meat

Porsche and Volkswagen do have long-time and intertwined relationships together, initiated by Prof. Dr. Ing. h.c. Ferdinand Porsche Sr. the grandfather of the two feuding grandsons Ferdinand Piëch the third son of his daughter and Wolfgang Porsche the third son of his son. More details regarding the background are provided below.

Porsche’s unlikely attempt to take over VW, a company 15 times its size, is doomed to failure. Beyond Porsche’s financial greed it is the family feud that plays a roll too. Mr. Piëch is the Chairman of VW and personally owns 13% of Porsches shares. His cousin’s family Porsche owns the other 87%. In fact this clash is between both two companies and two cousins.

Mr Piëch has now made it quite clear that it is he and VW that are in the driving seat and not, as seemed likely only a few months ago, his cousin, Wolfgang Porsche, or Mr Wiedeking, Porsche’s CEO.
Although there may be other options, it looks almost certain that Porsche will be fully integrated into the VW Group, joining VW as its seventh car brand. VW owns already Audi, Skoda, Seat, Bentley, Lamborghini and Bugatti. And the chief- executive of VW, Martin Winterkorn, will be in charge to run the show. A gloating Mr Piëch said; “that he could not imagine Mr. Wiedeking would be willing to become a mere divisional chief within the merged company, as a man used to ‘marching through’ his career would have to climb down very many stairs and practise “humility”. Factually it’s a well-earned and immense humiliation for those arrogant greedy individuals.

Originally it were Wolfgang Porsche and Wiedeking with the help of Porsche’s CFO Holger Härter who construed about two years ago the bold plan to take over VW and that now is unravelling in a matter of weeks. In late November, Mr. Wiedeking confirmed that he wanted the “dominant control” of VW and would use a €10 billion credit line to realize the share options. But it never happened.

In January the firm increased its stake in VW to its present 50.8%, almost tripling its net debt to €9 billion in the process, just as sales at Porsche’s car business were tumbling—leaving less cash to pay the interest on the debt. Conditions in the credit markets made it harder to borrow more and for longer. Porsche was able at the end of March to roll over its existing loan only by pledging its VW shares to the banks and promising to pay back €3.3 billion within six months.

Now Mr. Piëch can’t imagine VW taking on the €9 billion debt that Porsche racked up by acquiring its 50.8% in VW. While giving a senior job to Holger Härter, Porsche’s once-feted chief financial officer, who was the joint-architect with Mr. Wiedeking of the attempt to win control of VW. Both have to face the blame and shame for the consequences of their greed and their plan’s failure. Anyhow all this is another proof that ‘Greed breeds Fate’.

Either the two families will have to dig into their pockets, or VW will simply buy Porsche’s car business with an estimated value of €5 - € 6 billion on a stand-alone basis. Leaving the Porsche family holding the bag. Both options would give Mr. Piëch what he wants: uncontested control of the world’s second-biggest car firm and a sweet revenge.


History:
Prof. Dr. Ing h.c. (Doctor Honorius Causa) Ferdinand Porsche (3 September 1875 – 30 January 1951) was an Austro-Hungarian born automotive engineer. He is best known for creating the Volkswagen Beetle as well as the first of many Porsche sport automobiles, and for his contributions to advanced German tank designs: Tiger I, Tiger II and the Elefant. Porsche was awarded in 1937 the German National Prize for Art and Science, a very rare decoration in the Third Reich. Porsche was later contracted by Volkswagen for additional consulting work and received a royalty on every Volkswagen Type I (Beetle) car manufactured. This provided Porsche with a comfortable financial situation as more than 20 million Types I were built.

In November 1950, Porsche visited the Wolfsburg Volkswagen factory for the first time since the end of World War II. Porsche spent his visit chatting with Volkswagen president Heinrich Nordhoff about the future of the VW Beetle, which were already being produced in large numbers. A few weeks later, Porsche suffered a stroke. He did not fully recover, and died on January 30, 1951.
In 1996, Porsche sr. was inducted into the International Motorsports Hall of Fame and in 1999 posthumously won the award of Car Engineer of the Century.
Porsche's son, Ferry Porsche, is the eponym for Porsche automobiles, initially based to a large extent on the Volkswagen (Beetle) design.

Porsche’s sr. grand son Ferdinand Piëch born in Vienna (1937), graduated from the ETH Zurich, Switzerland in 1962, with a degree in mechanical engineering, having written a Master Thesis about the development of a Formula One (F1) engine. At the same time, Porsche was involved in F1 and developed an 8-cylinder engine for the Porsche 804. From 1963 to 1971, he worked at Porsche in Stuttgart, Germany, on the development of the Porsche 906 and following models that led to the successful Porsche 917. In 1972, he moved to Audi in Ingolstadt, Germany. Starting from 1975, he was manager of technological engineering, being responsible for the concepts of the Audi 80 and Audi 100. In 1977 he also began the development of a car for the World Rally Championship, resulting in the four-wheel drive Audi Quattro. The engine used in the Quattro model was a turbocharged inline-5 cylinder unit.

Piëch held a small engineering company in the time between leaving Porsche AG and joining Audi, and while there he developed a 5 cylinder in-line diesel engine for Mercedes-Benz. He picked up the concept again after moving to Audi, because there was a market demand for engines with more than 4 cylinders.
In 1993, Piëch moved to Volkswagen Group ‘Volkswagen AG’, where he became Chairman and CEO, succeeding Dr. Carl Hahn. He retired from the Board of Management in 2002, but as Chairman of the Supervisory Board, he still serves in an advisory capacity.
While head of Volkswagen Group, Piëch was known for his aggressive moves into other markets. He drove the Volkswagen and Audi brands upmarket with great success. Piëch also pursued other brands, successfully acquiring Lamborghini for Audi, and establishing Bugatti Automobiles SAS. His purchase of British Rolls-Royce and Bentley was more controversial. After successfully buying the Crewe, England car building operation, VW was denied ownership of the Rolls-Royce name.
His effort to rescue Volkswagen in North America was a great success. Dr. Hahn's previous efforts to regain market share in the United States and Canada - which he had built up as the head of Volkswagen of America from 1958 to 1965 - were to no avail, but Piëch helped reverse VW's fortunes by agreeing to the manufacture of the Volkswagen New Beetle. Its introduction in 1998 gave Volkswagen of America a much-needed momentum.

Volkswagen Company:
In 1933, Adolf Hitler met with Ferdinand Porsche to discuss Hitler's idea of a ‘volkswagen’ a people's car that could carry 5 people, cruise up to 62mph, with fuel consumption of 33mpg, and a cost of only 1000 Reich Marks. This was an opportunity for Porsche to push his idea of a small car forward, as was it to help Hitler get a real people's car for the citizens of Germany.
Initially, Porsche designed two versions that didn’t meet the originally set specifics. His new design VW version 3 was ready for rigorous testing in 1936.
In 1938, the construction began on the KdF Wagen Factory. In 1939, several VW38s ‘pre-production’ and VW39s ‘demonstration cars’ were produced just to show that the factory did work, and to show what the final version of the car would look like. This edition of the car was the basis of the Beetle after the war was over.

When the V38s were introduced, Hitler abruptly changed the name of the car to KdF Wagen. KdF stood for "Kraft durch Freude" which meant "Strength through Joy." This upset Porsche, as he was not a member of the Nazi party, and he didn't support Hitler's use of propaganda when advertising the car.

The KdF Wagen factory after the war was a prime target for allied forces during the war, and before long, it was partially destroyed. After the war was over, the British Army took over the factory. The British were interested in the factory, because they needed light transportation. The factory was brought back up because it was still severely damaged. And brought under the management of Major Ivan Hirst of the British Army. By late 1945 the factory produced more than 2000 cars. Most of them were made from spare parts that were left in the factory. Thereafter within a year, the factory produced over 10,000 cars, all thanks to assistance from the British government. In that period the factory was renamed Volkswagen by the British, who also designated its town at the factory "Wolfsburg", after a local castle. The British tried to offer control of the company to able hands, but the Ford Company turned the offer down because it thought it would be a waste of money, while the French government refused. Nobody seemed to want the company. In 1949, the British government was finally able to relinquish control of the company to the German government. Heinrich Nordhoff at the time was appointed as the senior executive of Volkswagen, a move, which proved to be very successful.

Porsche Company: (Volkswagen’s Meat)
Ferdinand Porsche sr. founded the company Porsche in 1931.
In 1948 under the direction of Ferry Porsche his son and Wolfgang’s father, a sports car ‘the 356’ was built in Gmünd (Austria) based on Volkswagen parts. On June 8, 1948 the first sports car bearing the name Porsche is born. A roadster constructed of light metal. 1950. Porsche returns to Zuffenhausen-Germany, near Stuttgart. A new chapter in Porsche's history has begun. Porsche becomes an independent automobile factory. In 1956 the 25th anniversary of the Company is commemorated, with the 10,000th Porsche 356 that leaves the production hall. By that time Porsche also had scored 400 victories in motor racing.
At the Frankfurt International Automobile Show, in 1963 Porsche presents the first 911, with the underlying concept of an air-cooled flat engine in the rear of the car.
In 1964: Porsche introduced the 904with streamlined plastic body-shell, with the then lowest drag coefficient 0.33. And in the same year the production starts of the Porsche 911. Under the management of Ferry Porsche as Chairman of the Supervisory Board Porsche goes public in 1972. The company currently produces 911 (997), Boxster and Cayman sports cars and Cayenne sport utility vehicles. The latest model line, the four-door Panamera sedan, was launched in April 2009.