Porsche and VW: What the Hell Happened?

Wendelin Would-be King

Porsche chairman Wendelin Wiedeking and his deputy, money man, and chief strategist Holger Härter hatch a secret plan to take control of Volkswagen, which sells sixty times as many cars.
Porsche begins buying up VW shares. The purchases are first revealed in mid-2005, when Porsche shocks the financial world with the announcement that it plans to acquire more than 20 percent of the VW Group and become the largest single shareholder.
By mid-2006, Porsche's stake reaches 25 percent, and by March 2007 it's 30 percent. But "a complete takeover is not our intention," says Wiedeking. "Instead, we want to protect one of the world's biggest carmakers from corporate-raiding locusts."
In October 2008, sitting on a fat, 42.6 percent block of VW shares (and with options to purchase another 31.5 percent), Wiedeking finally admits his intentions for Porsche SE Holding to take over 75 percent of VW shares during the course of 2009.
As Porsche's buying pushes up VW's stock price, Porsche purchases options to buy more shares, and those options zoom in value as the stock price continues to climb. Profits from these financial manipulations soon exceed Porsche's profits from carmaking, an unprecedented event in German business history.
Reaching the 75 percent threshold would trigger the ominous "domination and profit transfer" contract, the true essence of the deal. At that point, Porsche would have the ability to clean out VW's coffers and receive an immediate 8 billion ($11.4 billion) cash back on its purchase.
The worldwide financial system hits an iceberg in the fall of 2008, and the banks won't lend Wiedeking any more money to complete the acquisition. In fact, they begin to call in their loans - triggering a liquidity crisis at Porsche.
In the spring, Wiedeking goes looking for an outside investor and finds one in the emir of Qatar. But VW's Ferdinand Piëch, together with Christian Wulff, the premiere of Lower Saxony (which has a 20 percent stake in VW), and German chancellor Angela Merkel advise cash-rich sheikhs to invest not with Porsche but instead divert their funds to Wolfsburg.
Porsche essentially collapses into the arms of VW; the merger is to be completed in 2011. The Porsche and Piëch families, which control Porsche's voting shares, must kick in to help ease the 9 billion ($13 billion) debt burden that Porsche brings with it. The once-independent sports-car maker - which Wiedeking boasted was the world's most profitable auto company - will become the VW Group's tenth brand, on par with Audi and Bentley.
On July 23, 2009, Wiedeking, Härter, and Porsche admit defeat. The CEO, who last year enjoyed an American-style payday of 80 million ($114 million), grabs another 50 million ($71 million) on his way out the door. Härter is booted as well; he grabs 12.5 million ($18 million). Michael Macht becomes Porsche's new chief executive.

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Porsche and VW: What the Hell Happened?

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