NEWS: Porsche and VW: What the Hell Happened?

October 26, 2009
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Wendelin Would-be King
  1. 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.
  2. 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.
  3. 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."
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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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The Fallout
With car guy Ferdinand Piëch back in charge, the future of Porsche will differ dramatically from Wiedeking's profit-above-all-else vision. The focus will be to burnish Porsche's reputation as the world's leading sports car manufacturer.
The first of Wiedeking's babies to be axed will be the Cayenne II and the Panamera, although the process will take some time. Unfortunately, the Panamera is brand-new and needs to go full life-cycle, from 2010 to 2017. The Cayenne will be replaced next year and is also going to be with us for seven more years. A source from within VW HQ explains: "We pulled the plug too late. There should not be a new VW Touareg or a new Audi Q7, and there should be no more Cayenne. These vehicles are too big, too heavy, too thirsty. They damage the brands, send out the wrong message, and are no longer socially acceptable. They will have to bite the dust after the next generation. The Audi Q5 and VW Tiguan are the right size and the right concept. That's why it would make sense to derive the next Cayenne from the next Q5."
And the Panamera? "The Panamera faces similar problems. We are considering letting Lamborghini use it for the Estoque, but midterm it also needs to go. We could replace it with a rebodied, high-performance derivative of the next Audi S7 or RS7 Sportback. Such a vehicle would be 650 pounds lighter and would feature a hybrid drivetrain. We could even derive a beautiful two-door coupe from this components set. Think of it as the modern 928."
A new supercar, along the lines of the Carrera GT, is considered a must-have. It may be developed in conjunction with Lamborghini and Bugatti to create enough volume for trend-setting technologies.
At the opposite end of the spectrum, a reincarnated 356 is important as well. At this point, it isn't clear whether the car will join the upcoming VW/Audi mid-engine coupe/roadster (previewed by the BlueSport show car) or be twinned with the Boxster.
Still another new car could be based on the Modular Sports Car Structure (MSS) being prepared for Bentley, Lamborghini, and Bugatti. MSS would clear the way for a more upmarket mid-engine sports car powered by a flat eight. The flat eight would be based on the six-cylinder boxer engine, in the same way the flat four is to be its downsized sibling.
If this game plan materializes, Porsche would add three new sports cars within the next six years.

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