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AUTO NEWS: VW-Porsche ties may steer industry future

I'd love to be a guest at the next Porsche-Piech family dinner. Not because two of the richest and most secretive clans in Europe probably pour a dynamite single-malt, but to see the inevitable food fight.

I'd love to be a guest at the next Porsche-Piech family dinner. Not because two of the richest and most secretive clans in Europe probably pour a dynamite single-malt, but to see the inevitable food fight.

It'll be very civilized I'm sure. More Noel Coward than John Belushi. But there'll be blood on the walls before the cognac is served.

The family dynamics of the super-rich, German politics and international finance are playing out in a drama to control two of the auto industry's leading companies.

The futures of Volkswagen and Porsche are at stake. Depending on fortune and the German car sales, VW may be the world's largest automaker by the end of this year. Its ambitious U.S. expansion plan includes at least one new assembly plant.

Porsche is tiny, but the legendary sports car maker is among the industry's most revered brands.


The companies are as closely related as Cain and Abel. Ferdinand Porsche created the Beetle and used VW parts when he founded his company in 1948.

Today, VW Chairman Ferdinand Piech is Porsche's grandson and a member of the two families that control Porsche. VW and Porsche have cooperated on many vehicles through the years, including today's Porsche Cayenne.

By some reports, Piech sees himself as the true heir to Ferdinand Porsche's brilliance, and the man who should be running Porsche.

That job belongs to Wendelin Wiedeking, however, a businessman who saved Porsche from financial ruin. Firmly supported by Piech's cousin, Wolfgang Porsche, Wiedeking made the Porsche and Piech families billions of dollars and led Porsche's acquisition of 51 percent of the VW Group.

Porsche was loaded with cash, thanks to Wiedeking's management. VW stock was cheap because historically it is not a particularly profitable or well-run company.

The next thing you knew, Porsche held 51 percent of VW. You might think that means control of a publicly traded company, but not if you understood German politics and labor relations.

Like shooting a rhinoceros with a BB gun, it turns out that acquiring 51 percent of VW only makes the beast mad.

That's because the German state of Lower Saxony, where VW is based and employs thousands, owns 20.1 percent of the company. A special law gives Lower Saxony veto power over VW decisions. Wiedeking vowed Porsche would make VW more competitive and ended silly vanity projects like the Phaeton luxury sedan.


The gloves came off. VW's unions lashed out at the suggestion they give up benefits. Lower Saxony dug in its heels. Porsche challenged the VW law under European Union rules. Ferdinand Piech bided his time and lined up allies.

Then the global financial markets crashed, the European Union decided to sit on its hands before the seemingly inevitable rejection of the VW law, and Wiedeking and Porsche had the short end of the stick.

The unions and Piech said they oppose Porsche control because the company is so badly managed that the stock options saddled it with a $12.7-billion debt -- in spite of the fact that Wiedeking's leadership had enriched Piech and his extended family immensely.

Piech countered that Porsche could keep its 51 percent, and VW would "rescue" Porsche in exchange for 49 percent of the automaker he and his family own, making it a minor subsidiary of the VW Group. His cousins told him to fly a kite.

Enter Qatar's national investment agency, looking to invest a few billion petrodollars in a stable, well-run company.

Watch for Qatar to buy the VW options and get the heat off as Porsche awaits the VW law's reversal.

With VW's engineering might and Wiedeking's nose for profit, the company could be a juggernaut. If the Piech-union-Lower Saxony troika wins, all bets are off.

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