Editorial: Wiedeking and Piech, the War of the Hard-Noses

Bertel Schmitt
by Bertel Schmitt

Poor Wendelin “walk-on-water” Wiedeking is getting it from all sides. Yesterday, he was the Jesus Christ of the automotive world. Only He could perform the miracle of having more profits than sales—two times in a row. The multiplication of bread and dead fishes is mere amateur hour compared to the unnatural act of turning sales of €3bn into profits of €7.34bn. But will the man be revered until eternity? Just the opposite is true: After bringing in the bacon, Wiedeking is being led to the slaughterhouse, squeaking for his dear life. And yet, Wiedeking’s troubles are just the surface scatter of a brutal family feud that makes the War of the Roses look like flower power. They even brought in the Feds . . .

Automobilwoche [sub] tells its aghast (or smirking) readership that BAFIN, Germany’s equivalent of the SEC, finally opened an investigation into Porsche for stock manipulation, something they had carefully avoided. In March, Berlin’s financial watchpuppies had declared they would not investigate, due to a lack of evidence. However, last week, BAFIN got a smoking gun dropped into their lap and was forced to take action.

The German magazine Wirtschaftswoche just happened to come across the transcript of a clandestine meeting held in early February 2008 between two Porsche executives, their lawyers, and a ranking representative of the government of Lower Saxony, holder of 20% of the VW shares.

In that meeting, Porsche had announced their intent to buy 75 percent of Volkswagen. Not only that, they said they wanted to make sweeping changes at VW, and to strip Lower Saxony of its controlling minority, courtesy of the “Volkswagen Gesetz.” If that piece of news would have become public, the stock would have skyrocketed. Absent of news, the stock dropped. A month later, Porsche denied that it intended to acquire 75 percent of the VW shares. The VW share treaded water.

In October 2008, the news of a global car meltdown attracted short sellers to the VW stock. Unbelievably, it traded at €400. In a few days, it plunged to slightly over €200—still way overpriced in light of the ensuing carmageddon. Just when the VW share had dropped to the level where it previously had languished for a year, Porsche let it be known that they wanted 75 percent of the stock—and were already in control of most of the available shares, one way or the other. Frantic short covering drove the VW stock to vertigo-inducing heights of over €1K a piece. Big hedge funds were NFSWed. Pandemonium. Now, the stock is back in its old €200 range.

Ever since, the humiliated hedgies have been busy seeking revenge, and preferably hefty damage payments from Porsche. Care to guess who leaked the menacing meeting memo to the magazine?

Not too fast. The leaks could have come from another side. Ever since the lurid tale of hookers for union leaders was leaked, conveniently timed before a crucial election, the people working on the top floor of the Volkswagen Hochhaus had gained the respect of professional plumbers and leakers for adroitly using information, the media, and law enforcement—should it come to that.

Even BAFIN is listening for the drip-drip of a leak: BAFIN doesn’t want to bring criminal charges against Porsche . . . yet. They want to conclude their investigation first. Because, so said a speakstress of the agency in charge of financial oversight, it cannot be ruled out that someone has put out the information with the intent of harming Porsche. Sharp thinking!

Porsche of course vehemently denies all charges. Now, Porsche and VW, or make that Piech and Wiedeking, are on a war footing. Porsche even took the chain off an unlikely attack dog: Uwe Hück, head of the Porsche workers council, fired a salvo in the direction of Wolfsburg and said he had hired lawyers to check into reporting Volkswagen’s Ferdinand Piech to the authorities, on grounds of yet to be specified violations of securities laws.

A few weeks ago, we reported that Wendelin Wiedeking and his derivative-wielding CFO, Holger Härter, had been sent to death row after a sitdown by the Porsche Family. The Porsche/Piech clan found themselves suddenly perilously short of funds. All the while everybody had thought they had amassed untold riches with puts, shorts, straddles, long condors and short butterflies, Porsche was running out of dough. They had to go begging to the banks, who grumpily loaned them €10 billion with draconian conditions attached.

This was the minute of Napoleonic (in stature and cunning) Ferdinand Piech, who grabbed his chance to put Wiedeking and Härter back in their box after they had done their deed. The takeover of VW by Porsche morphed into a takeover of Porsche by Volkswagen which is owned by the Porsche Family.

Now, Piech is doing what he does best: slow execution of a top executive by a thousand cuts. At the sidelines of a presentation of the new Polo in Sardinia (befittingly home of the “culture of vendetta, in which clans mete out their own justice with no deference to any state or to any organization,” as Pino Arlacchi’s wrote in his book “Why There’s No Mafia in Sardinia”), Piech pulled out his paring knife and started slicing. Gerhard Mauerer of Automobilwoche [sub] stood close by and took notes.

Usually, Piech doesn’t say much. Questions are often answered with a sardonic grin. In Sardinia, Piech suddenly turned into a verbal waterfall. A simple merger with Porsche is out of the question, “because it would mean the loss of existing rights of Volkswagen” said Piech, head of VW’s supervisory board and capo di tutti capi of the Piech faction of the Porsche/Piech clan. He then said that he also doesn’t want to limit the rights of the state of Lower Saxony, always a trusted Piech ally, especially since Lower Saxony had been ruled by the conservative CDU.

Before Volkswagen and Porsche can merge, Piech went on to say, Porsche (as in Wiedeking) has to solve its own financial problems. Piech opined that Porsche (as in Wiedeking) is having a hard time finding money, Volkswagen (as in Piech) on the other hand doesn’t suffer from financial anorexia. Therefore, said the Chairman, it is not unthinkable that Volkswagen buys Porsche: “That’s one of the possible solutions. Our favorite is what is fast and painless,” said the purveyor of slow and painful death. As for how much VW’s Piech would be willing to pay Porsche/Piech for Porsche (are we confused yet?) Piech doesn’t think it’s much: “VW only will pay what Porsche is worth.” Translation: Not a whole lot. Maybe a few Euro more than what Fiat pays for Chrysler.

Asked about Wiedeking, Piech didn’t grin. He pulled out his whetstone, carefully honed his cutlery, and then slowly sunk it in, twisting the blade: “Currently” Wiedeking still has his trust, he said. And just in case someone hadn’t listened, Piech added: “Did I say ‘currently?’ Strike that.” And on he went to throw Wiedekind to the curb, literally: “He’s trying hard to fix the blown tire.” Unsaid, but understood by anybody who knows Piech: Wiedeking will blow it again, and then he will be blown away by the Machiavellian (in cunning and intrigue) Piech. From Lopez through Pischetsrieder and Bernhard: Piech’s career path is littered with corpses, which he uses as helpful stepping stones.

While applying cuts, Piech couldn’t help himself from filleting the Fiatsco. A possible joint Fiat-Chrysler-Opel doesn’t cost the Chairman much sleep, he said. It had taken Volkswagen and Audi 15 long years to truly merge, Piech said.

And he should know, he ruled both. He did everything to keep Volkswagen at a distance when he ruled Audi. And the true merger came to pass only after Piech took the helm at Volkswagen, surrounded by trusted men from his Audi times.

Never short of a quotable line, Piech quipped: “Two or even three sick people in one bed don’t make a healthy one.” Going back down memory lane, Piech added: “The people who are right now thinking about these mergers won’t have 15 years time, I’m sure.”

Gotta go. I’ll talk to my lawyer about getting the movie rights.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

More by Bertel Schmitt

Comments
Join the conversation
2 of 15 comments
  • Mpresley Mpresley on May 15, 2009

    bluecon : So where is VW selling all these vehicles? When I was in China, I saw more VWs than any other (recognizable) brand. Most were taxis (looked like the old VW Quantum), but Passats and Jetta (various styles) abounded. The new Jetta (Sagitar) appeared to be popular in China, also.

  • Bertel Schmitt Bertel Schmitt on May 15, 2009

    mpresley: Actually, they make more VWs in China than in Germany, more than 1m. VW is also strong in other growth markets such as Brazil and Mexico.

  • Ted “the model is going to be almost 4 inches longer and 2 inches wider than its predecessor”Size matters. In this case there is 6” too much.
  • JMII Despite our past experience with Volvo my wife wants an EX30 badly. Small, upscale, minimalist EV hatch is basically her perfect vehicle.
  • Dukeisduke Is the Volvo EX30 even on sale yet? It was pulled from the NACTOY awards because they were having software problems with the vehicle.
  • Wjtinfwb If you've only got 5k to spend on transportation, I cannot imagine a worse way to spend it than on a GM orphan from Sweden that's 15 years old with 150k on the clock and limited plus expensive parts availability and dwindling techs who'd even want to work on it. Go find a similar vintage Camry or Accord with 150k miles or even a Ford or a Chevy, whatever. Hell, even an old Jaguar is less of a crapshoot than a Saab. At least you can still get parts.
  • Kwik_Shift Brands that were considered from China include BYD, Dayun, Great Wall Motors, Maxus, Nio, Omoda/Chery, Seres, XPeng, and Zeekr. KG Mobility from South Korea also made the list of candidates.That's a lot of car companies from there ready to head here.
Next