German carmaker Porsche's CEO has announced his resignation following a decision by the company's supervisory board to approve a deal with a Qatari investment fund for a capital injection of around five billion euros.
Wendelin Wiedeking steps down as CEO of Porsche
Wendelin Wiedeking, the chief executive of German carmaker Porsche AG, resigned Thursday after losing a power struggle with Volkswagen, which is set to take over Porsche.
Porsche's supervisory board agreed the resignation should be executed "with immediate effect" after a night-long session, making him the first high-caliber victim of the drawn-out takeover battle between Porsche and Volkswagen AG.
Early Thursday, the Porsche board approved a plan to raise 5 billion euros ($7.1 billion) in capital, including funds from a deal with the Gulf state of Qatar, which could buy a 10- to 25-percent stake in the highly indebted sports car maker. That could clear the way for a takeover of Porsche by Volkswagen.
The carmaker's management was also asked to prepare for creating an integrated company consisting of Porsche SE and Volkswagen AG.
Takeover tables turned
VW is now likely to take Porsche over
In planning to take over Porsche step-by-step, Volkswagen turned the tables on Porsche, which has been forced to abandon a push to acquire VW. The Porsche and Piech families, Porsche SE's controlling shareholders, agreed to the takeover with Volkswagen to integrate the brand into the VW group.
The ownership of the new merged VW-Porsche group would be split between a more-than 50 percent stake held by the Porsche and Piech families, a 19.9 percent stake held by the Qatar Investment Authority and 20 percent in the hands of the German state of Lower Saxony.
Under the integration plan, VW and Porsche would together forge a carmaker with 10 brands.
This includes VW's nine brands from premium saloons such as Lamborghini and Bentley through to its more mass market brands such as Skoda and its flagship Volkswagen. Porsche will be the 10th brand in the new group.
Piech wins power struggle
Piech comes out on top in the Porsche power struggle
Thursday's events came as a victory to Volkswagen chief executive Ferdinand Piech, who is also a shareholder in Porsche.
A power struggle between Wiedeking and Piech had tarnished both companies, and was said to be blocking an investment deal with the Gulf state of Qatar.
Late Wednesday, the Porsche supervisory board approved Wiedeking's plans for the five billion-euro capital increase and to begin talks with Qatar over an additional capital injection.
The supervisory committee "unanimously gave power to the management to seal the discussions" with the oil-rich Gulf state, a statement said.
The measures should allow Porsche to pay off at least part of its estimated 10 billion euros in debt incurred while gaining a majority 51-per-cent stake in VW, Europe's biggest carmaker.
But Porsche, which is owned by the Porsche and Piech families, finally decided to jettison Wiedeking and Haerter, saying that the two directors had also "come to the conclusion that the further strategic development of Porsche... is better off, if they are not on board as acting persons."
Wideking's protege to replace out-going CEO
Wiedeking (l) will be succeeded by Michael Macht
Wiedeking, 56, who had been at Porsche's steering wheel since 1993, will be succeeded by chief production executive Michael Macht.
Macht takies over after having helped the legendary sports carmaker's outgoing head to steer the company through some of its most turbulent times.
After nearly a decade as Porsche's production chief, the 48-year-old Macht is seen as Wiedeking’s protege.
Macht joined Porsche in 1990 just as the business pressures were mounting at the automotive group, with Wiedeking assuming the company's top job three years later after the iconic sports carmaker had plunged into a loss and amid concerns that it could be forced into bankruptcy.
Working together with Wiedeking as his right-hand man, Macht helped to introduce leaner production both at Porsche's main factory in southwest Germany and among its suppliers.
Macht also oversaw a rise in Porsche's production as the company's shares powered ahead and sales climbed to record highs.
Last year, Porsche reported 6.3 billion euros in profit, partially because of options it owned in Volkswagen after it attempted to mount its now failed takeover bid for VW.
Porsche bid farewell to powerful pair
Wiedeking (l.) and Haerter will leave with golden handshakes
Both Wiedeking and financial chief Holger Haerter, who is also leaving, also resigned their seats on the supervisory boards of Volkswagen and Audi AG, a subsidiary of the Volkswagen Group.
With their resignations, both managers wanted to make "a significant contribution to the appeasement of the situation and to support the forming of an integrated car manufacturing company" with Volkswagen, Porsche said in a statement.
In a separate statement, Wiedeking said he would give a large part of his severance package to charities, saying the decision was based on "personal reasons and (my) responsibility to society."
He planned to create a foundation to aid in the development of "socially just" production sites for Porsche in cooperation with the company's works council.
Around 1.5 million euros was also to be donated to foundations that help journalists in need.
Wiedeking, whose contract was to expire in 2012, is to receive a 50-million-euro severance while Haerter is to be paid 12.5 million euros.
Merger battle fuelling political fires
The resignations and the turn of advantage towards VW could also bring a new dimension to the political tensions which erupted over the merger battle this week.
Ernst Pfister, economics minister in Baden-Wuerttemberg, the southern state where Porsche has its headquarters, lashed out at Chancellor Angela Merkel and the premier of the northern state where VW is based on Tuesday.
Piech with Lower Saxony's Premier Christian Wulff
Speaking in a radio interview, Pfister said Merkel and Lower Saxony Premier Christian Wulff "did not want to maintain Porsche's independence" as the sports carmaker faced up to a VW takeover push.
While Porsche is based in the Baden-Wuerttemberg capital of Stuttgart, VW's home is in Wolfsburg, Lower Saxony. Moreover, the Lower Saxony state government is VW's second biggest shareholder. Wulff is a member of the Merkel-led conservative Christian Democrats.
With Porsche now almost certain to be folded in with VW, it remains to be seen what level the animosity between the states and the chancellor will now reach at a crucial time for all German politicians, with a general election looming in September.
Editor: Neil King