- The Washington Times - Friday, July 24, 2009

STUTTGART, Germany | Volkswagen emerged Thursday atop a power struggle among members of the Piech and Porsche families that cost Wendelin Wiedeking his job as Porsche chief executive. Now VW is left to gather the spoils, namely the marquee Porsche name that will soon be counted with Audi, Bentley and Lamborghini, already among its stable of luxury brands.

“I don’t think Volkswagen will change it much, Porsche is such a brand,” said Howard Wheeldon, senior strategist at BGC Partners. “There’s huge value in just the brand; it’d be best to leave it alone.”

Volkswagen CEO Martin Winterkorn, who ran luxury brand Audi under VW ownership, said that is just what Europe’s biggest automaker plans to do.

“Like Audi today, Porsche can also continue its independent development under the aegis of Volkswagen and preserve its own identity,” he said after announcing plans to put the luxury sports car maker under VW’s umbrella through a merger.

Porsche also saw its board agree to seek a capital increase of at least $7.1 billion and throw its weight behind talks with a Qatar investment fund.

“We welcome the involvement of the Qatar fund, and assume that they will take 17 percent of Volkswagen shares from the options of Porsche SE, which will make them the third biggest shareholder in the VW/Porsche AG company,” said Christian Wulff, the governor of Lower Saxony, the German state where Volkswagen is based and which holds nearly 21 percent of the automaker.

For Porsche’s 10,000 workers - who have long prided themselves on the quality, respect and high prices fetched by the 911 sports car and Cayenne models, among others - that’s sure to be some welcome relief after weeks of back-and-forth and concern over the future of the company.

“The jobs are safe at Porsche, I promise you this,” said Uwe Hueck, the works council boss at Stuttgart-based Porsche. “Porsche AG will stay independent.”

The Porsche and Piech families also stand to gain now that Mr. Wiedeking, CEO since 1992, and chief financial officer Holger Haerter, have been dismissed, paying the price for what IHS Global Insight analyst Tim Urquhart called “their vaulting ambition in attempting the audacious takeover of Europe’s largest passenger car maker.”

Mr. Wiedeking and Porsche built a 51 percent stake in Volkswagen, but loaded Porsche company with debt just as the economy turned sour.

Porsche tied up so many VW shares that, when traders needed shares in October to cover bets they had made against the stock, a so-called short-squeeze briefly pushed VW shares so high that it was, briefly, the world’s most valuable company.

“Although the company made a huge paper profit gain on VW share rises last year, its bid to turn its majority stake of 50.76 percent into a domination stake of 75 percent stalled for lack of cash, with the credit crunch making it impossible to borrow the required amount on the capital markets,” Mr. Urquhart said.

Now Volkswagen is in the driver’s seat and cash-strapped Porsche appears headed to wind up as one of its brands along with names like Lamborghini and Bentley.

The two companies already cooperate making sport utility vehicles. VW and its chairman, Ferdinand Piech, had been pushing for a deal to fold the lucrative luxury-car business into its portfolio, widening its range in anticipation of a recovery in the luxury market. Mr. Piech also is part of the family that controls Porsche.

“As a result, Ferdinand Piech, as is usually the case, has triumphed and seen off what he saw as a wasteful and hostile takeover, which would have given another management group control over a company which he managed directly for 10 years and which his family helped create,” Mr. Urquhart said.

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