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Cornering Kingpin
VW dispute ends in deal: Porsche heir to step down
A high-stakes boardroom battle at Germany's largest carmaker ended in a truce on Friday as Volkswagen's chairman, Ferdinand Piëch, agreed to step down next year in return for two Porsche executives' gaining seats on the supervisory board.
Piëch, a powerful figure who was once Volkswagen's chief executive, has been accused by shareholders and other board members of a conflict of interests since Porsche, the rarefied sports-car maker controlled by his family, acquired 18.5 percent of Volkswagen's shares last fall.
Porsche contended that its investment entitled it to two seats on the Volkswagen supervisory board. But other directors objected, citing Piëch's dual role and saying that Porsche was trying to amass too much influence over Volkswagen, a company more than 10 times its size.
The dispute laid bare the web of interlocking ties among German companies and raised troubling questions about corporate governance at Volkswagen, a far-flung automotive empire with public and private shareholders that has been rocked by a bribery and corruption scandal.
Under an agreement reached between Porsche and Volkswagen's other major shareholder, the state of Lower Saxony, Porsche's chief executive, Wendelin Wiedeking, will join the board immediately. Its chief financial officer, Holger Härter, will be nominated for a seat in May.
Piëch, 68, will not stand for re-election when his contract expires in 2007, said a spokesman for Porsche, Michael Baumann. Piëch's successor will not come from Porsche or Lower Saxony, he said, a step that is intended to make the chairman a more neutral figure.
Investors welcomed the agreement, though some still expressed concern about Porsche's influence at Volkswagen. "I personally felt that one representative would have been adequate," said William Browne, a managing director at Tweedy Browne, a fund based in New York that manages Volkswagen shares and had campaigned to block the Porsche executives' election.
Still, Browne said, the departure of Piëch would be helpful. "Piëch had a conflict," he said. "To have him in there, with two other Porsche executives, would have tipped the scales."
Piëch, who sealed the agreement in a meeting with Wiedeking and the premier of Lower Saxony, Christian Wulff, did not issue a statement and could not be reached for comment.
When Porsche acquired the stake in Volkswagen last September, it said it was trying to protect the independence of one of its main partners. Volkswagen assembles much of the Cayenne, the Porsche sport utility vehicle, and the two are collaborating on hybrid gasoline-electric vehicles.
Volkswagen has struggled in recent years, and is viewed as a takeover target because the German law that shields it from unwanted suitors is in danger of being struck down in a European court.
But the investment, experts say, was as much about history as economics. Porsche and VW have been intertwined since before World War II, when Piëch's grandfather, Ferdinand Porsche, designed the Beetle at the behest of Hitler, who was in search of a "people's car."
Ferdinand Porsche's son started the sports car company, which is the foundation of the Porsche and Piëch family fortunes. Piëch sits on the board of Porsche, but he made his name at Volkswagen, taking a company that was in deep trouble in 1993 and reviving it with eye-catching new models.
"The objective of his life is not just to make money, but to have influence and to follow the heritage of his grandfather," said Ferdinand Dudenhöffer, the director of the Center for Automotive Research in Gelsenkirchen.
Among those who raised doubts about Porsche's investment was Wulff, the Lower Saxony official, who also has a seat on Volkswagen's board. He and other board members commissioned a report on the company's corporate governance practices from JP. Morgan, which criticized Piëch and said no major Porsche shareholder or manager should get a board seat.
A rumored boardroom revolt against Piëch never materialized, however, attesting to his powerful position, particularly with Volkswagen's unionized workers. Last November, Piech backed a former union official, Horst Neumann, to be Volkswagen's head of personnel, going against the wishes of the current chief executive, Bernd Pischetsrieder.
The previous personnel chief had resigned after a scandal involving the company's dealings with its worker representatives. Porsche had to come to terms with Lower Saxony, analysts said, since it is the company's largest shareholder. Porsche also does not want to disrupt a radical overhaul of Volkswagen that is being led by Pischetsrieder and his chief lieutenant, Wolfgang Bernhard. In a vote of confidence, Volkswagen's board is expected to Pischetsrieder's contract for five years.
Volkswagen, which has been struggling to cut its labor costs in Germany, said on Friday that it will assemble a new model in Portugal, starting in 2008. Volkswagen's board is also setting up a special committee to oversee the commercial relationship between Porsche and Volkswagen. Both companies have pledged to negotiate deals on an arm's length basis.
"The key question now is whether Porsche will accelerate the restructuring program at Volkswagen," said Jens Schattner, an auto industry analyst at Dresdner Kleinwort Wasserstein in Frankfurt.
Source
A high-stakes boardroom battle at Germany's largest carmaker ended in a truce on Friday as Volkswagen's chairman, Ferdinand Piëch, agreed to step down next year in return for two Porsche executives' gaining seats on the supervisory board.
Piëch, a powerful figure who was once Volkswagen's chief executive, has been accused by shareholders and other board members of a conflict of interests since Porsche, the rarefied sports-car maker controlled by his family, acquired 18.5 percent of Volkswagen's shares last fall.
Porsche contended that its investment entitled it to two seats on the Volkswagen supervisory board. But other directors objected, citing Piëch's dual role and saying that Porsche was trying to amass too much influence over Volkswagen, a company more than 10 times its size.
The dispute laid bare the web of interlocking ties among German companies and raised troubling questions about corporate governance at Volkswagen, a far-flung automotive empire with public and private shareholders that has been rocked by a bribery and corruption scandal.
Under an agreement reached between Porsche and Volkswagen's other major shareholder, the state of Lower Saxony, Porsche's chief executive, Wendelin Wiedeking, will join the board immediately. Its chief financial officer, Holger Härter, will be nominated for a seat in May.
Piëch, 68, will not stand for re-election when his contract expires in 2007, said a spokesman for Porsche, Michael Baumann. Piëch's successor will not come from Porsche or Lower Saxony, he said, a step that is intended to make the chairman a more neutral figure.
Investors welcomed the agreement, though some still expressed concern about Porsche's influence at Volkswagen. "I personally felt that one representative would have been adequate," said William Browne, a managing director at Tweedy Browne, a fund based in New York that manages Volkswagen shares and had campaigned to block the Porsche executives' election.
Still, Browne said, the departure of Piëch would be helpful. "Piëch had a conflict," he said. "To have him in there, with two other Porsche executives, would have tipped the scales."
Piëch, who sealed the agreement in a meeting with Wiedeking and the premier of Lower Saxony, Christian Wulff, did not issue a statement and could not be reached for comment.
When Porsche acquired the stake in Volkswagen last September, it said it was trying to protect the independence of one of its main partners. Volkswagen assembles much of the Cayenne, the Porsche sport utility vehicle, and the two are collaborating on hybrid gasoline-electric vehicles.
Volkswagen has struggled in recent years, and is viewed as a takeover target because the German law that shields it from unwanted suitors is in danger of being struck down in a European court.
But the investment, experts say, was as much about history as economics. Porsche and VW have been intertwined since before World War II, when Piëch's grandfather, Ferdinand Porsche, designed the Beetle at the behest of Hitler, who was in search of a "people's car."
Ferdinand Porsche's son started the sports car company, which is the foundation of the Porsche and Piëch family fortunes. Piëch sits on the board of Porsche, but he made his name at Volkswagen, taking a company that was in deep trouble in 1993 and reviving it with eye-catching new models.
"The objective of his life is not just to make money, but to have influence and to follow the heritage of his grandfather," said Ferdinand Dudenhöffer, the director of the Center for Automotive Research in Gelsenkirchen.
Among those who raised doubts about Porsche's investment was Wulff, the Lower Saxony official, who also has a seat on Volkswagen's board. He and other board members commissioned a report on the company's corporate governance practices from JP. Morgan, which criticized Piëch and said no major Porsche shareholder or manager should get a board seat.
A rumored boardroom revolt against Piëch never materialized, however, attesting to his powerful position, particularly with Volkswagen's unionized workers. Last November, Piech backed a former union official, Horst Neumann, to be Volkswagen's head of personnel, going against the wishes of the current chief executive, Bernd Pischetsrieder.
The previous personnel chief had resigned after a scandal involving the company's dealings with its worker representatives. Porsche had to come to terms with Lower Saxony, analysts said, since it is the company's largest shareholder. Porsche also does not want to disrupt a radical overhaul of Volkswagen that is being led by Pischetsrieder and his chief lieutenant, Wolfgang Bernhard. In a vote of confidence, Volkswagen's board is expected to Pischetsrieder's contract for five years.
Volkswagen, which has been struggling to cut its labor costs in Germany, said on Friday that it will assemble a new model in Portugal, starting in 2008. Volkswagen's board is also setting up a special committee to oversee the commercial relationship between Porsche and Volkswagen. Both companies have pledged to negotiate deals on an arm's length basis.
"The key question now is whether Porsche will accelerate the restructuring program at Volkswagen," said Jens Schattner, an auto industry analyst at Dresdner Kleinwort Wasserstein in Frankfurt.
Source
