German Carmaker Family Feud Plays Out in VW Boardroom | Business| Economy and finance news from a German perspective | DW | 18.09.2008
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German Carmaker Family Feud Plays Out in VW Boardroom

As family-owned Porsche continues to up its stake in VW, a nasty feud has broken out between Volkswagen Board Chairman Ferdinand Piech and his cousins at Porsche over the future of Europe's biggest carmaker.

Volkswagen and Porsche logos side by side

Porsche aims to up its stake in VW to over 50 percent later this year

Ferdinand Piech is 71, a billionaire and a brilliant technocrat who has reached the pinnacle of the automobile industry as supervisory board chairman of Volkswagen, Europe's biggest automaker. And he's also having some family problems.

Wolfgang Porsche, who in addition to being the chairman of the German luxury carmaker that bears his name also happens to be one of Piech's cousins, is trying to unseat Piech by buying up VW stock through Porsche's holding company. The company currently owns 35 percent of VW ordinary stock and has plans to increase its share to over 50 percent in November.

Unwilling to relinquish control to Porsche without a fight, Piech decided, unexpectedly, not to show up for a board meeting over technical cooperation between Porsche and VW's upscale Audi division last week.

graphic chart showing ownership structure of Porsche holding in both Volkswagen AG and Porsche AG

Piech maintains a dual role as supervisory board chairman of VW and Porsche heir

The chairman's absence gave the balance of power to the board's workers representatives in a vote that ended in a tie and leaves Porsche having to seek board approval for any cooperation with Audi.

When blood's not thicker than water

But the symbolic implications of the vote -- and Piech's tacit support for the unions over his family -- reverberated beyond the boardroom. While it was not unusual for Piech to take the side of the unions, that he did so in public against his own family was a precedent, said a former Volkswagen manager, who spoke to DW-WORLD.DE on condition of anonymity.

The normally reserved Wolfgang Porsche told Germany's Focus magazine, "Ferdinand is ruining the whole family. This is unbelievable."

The conflict has advanced to a point where Porsche has admitted there are plans to dethrone Piech.

"It's not a matter anymore of whether he's going or not. But when and how," said Porsche.

Porsche chairman Wolfgang Porsche (left), Volkswagen CEO Martin Winterkorn (middle) and Volkswagen chairman and Porsche heir Ferdinand Piech (right)

Wolfgang Porsche now (left) wants to unseat Piech (right)

Unseating Piech from VW's 20-member supervisory board, however, will prove difficult, since the chairman enjoys support from labor unions.

Piech, unions vs. Porsche, management

Last week some 40,000 union workers demonstrated outside VW's headquarters in Wolfsburg to protest against changing the controversial VW law.

The state of Lower Saxony, where VW is based, also has a say in the family feud. The state has only a 20 percent equity stake in Volkswagen, but exercises enormous voting power thanks to the VW law, which gives the government veto power on major company decisions.

Workers were also nervous about Porsche's harsh management tactics with union leaders concerned about job cuts if Porsche gains complete control of VW.

Volkswagen is by far Lower Saxony's largest employer and state Premier Christian Wulff, who also sits on the VW supervisory board, is looking to keep his state's job motor humming, which aligns him with Piech and unions.

German newspapers have been speculating that Piech now wants to get Porsche CEO Wendelin Wiedeking off the Volkswagen board and is using the unions to dilute the influence of his Porsche relatives in VW company affairs.

An estimated 40,000 Volkwagen unon members demonstrating against EU plan to scrap VW law on Friday, Sept. 12

The demonstration was against the VW law, but directed at the unpopular Porsche CEO

No holy cows

"The VW patriarch is escalating a conflict in which he should be acting as mediator," wrote the German daily Sueddeutsche Zeitung. "Above all he is hostile to Wiedeking, who has become too powerful for his taste. Piech is holding a company with 330,000 employees hostage just because he doesn't like the attitude of one manager."

Piech has a record of collaborating with unions to get rid of management. In 2006 he worked to oust then CEO Bernd Pischetsrieder, who got word he was fired through the press.

Piech sees himself as a visionary with a management style very much at odds with Wiedeking's approach to business.

Porsche CEO Wendelin Wiedeking (left) and Ferdinand Piech (right)

Porsche CEO Wiedeking (left) and Piech (right) have different visions for VW

"Piech sees his vision endangered by Wiedeking," said Ferdinand Dudenhoeffer, director of the Center of Automotive Research (CAR) in Gelsenkirchen. "Wiedeking said that there are no holy cows at VW, no more Phaetons, no more Bugattis.

"There was always a cease-fire between Piech and the Porsches, but now it's war. Wiedeking is destroying Piech's shining vision," Dudenhoeffer added.

Cease-fire turns to war

For Piech, profits are secondary to spectacular engineering feats, according to Christoph Stuermer, an auto analyst for Global Insight in Frankfurt who has followed Volkswagen and Porsche for years.

"Piech is one of the most gifted car engineers on the planet," he said. "He wants to be the living Michelangelo of cars."

Piech's talents have been profitable for Volkswagen. The company earned 4 billion euros ($5.7 billion) in profits on a turnover of 109 billion euros last year, surpassed Ford to become No. 3 in the world in unit sales and is the globe's most diverse automaker with brands including Scania, SEAT, Skoda, Audi, Bentley, Lamborghini and Bugatti.

Black and white photo taken in 1938 of a Volkswagen Beetle, surrounded by the group of men who designed and engineered the classic model

Granddad Ferdinand Porsche designed the VW Beetle

But despite the overall profits and name recognition, it's PIech's pet projects that irritate Wiedeking most, Stuermer said.

"Wiedeking is a Porsche CEO from another corporate culture," he said. "He's out to maximize profits by cutting costs and he snubbed everyone, telling off VW management, interfering with their way of doing business."

Perhaps Ferdinand "Ferry" Porsche, the namesake son of the man who developed the VW Beetle and Piech's uncle, had the right idea in the 1970s when he said all Porsche and Piech family members working at Porsche had to leave management to outsiders because of family squabbles.

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