Editorial: Tomorrow, Porsche Will Disclose Their VW Plans. Any Bets?

If you think about flying to Stuttgart tomorrow, better book now. It will be a full house tomorrow at Porsche’s annual “Bilanzpressekonferenz.” The presentation of annual numbers to the press. At this confab, the information-hungry media will be fed with finger food and glossy brochures, drowned in champagne and a sea of PowerPoint charts. Why would anyone be interested in a small maker of sports cars that was nearly bankrupt when Wendelin Wiedeking took over? How did P.J.O’Rourke put it so nicely? “In the gutter in front of the razed crack houses was a brand-new Porsche 928 flipped on its back and wadded like Kleenex.”

That was then, this is now. Now, Wiedeking promises to reveal his timetable for the takeover of Volkswagen. “Waitaminute,” I hear you say. “Don’t they own VeeDub already?”

Not exactly. Currently, Porsche holds 42.6 percent of the common stock of Volkswagen. It is also written that Porsche owns 31.5 percent in VW options, strike price and time to expiration unknown. Will Wiedeking say tomorrow when they’ll finally go for the whole shebang? We doubt it. Will they go over 50 percent this year, as planned? Will they go to 75 percent soon as rumored? We believe, Wiedeking will keep everybody guessing. Despite the fact that Porsche is rolling in money, they are Swabian.

Swabians are rumored to be Scots who had been extradited for being too stingy. Wiedeking already said that he will only buy Volkswagen if the stock isn’t too high. Of course, this was forgotten when, last month, the VW share traded above €1000, due to adroit machinations by Wiedeking and his CFO Holger Härter. The definitely non-dummkopf duo had engineered the classical short squeeze. Hedge funds all over the world unwittingly financed Porsche’s takeover of the world’s third largest auto maker.

Die Welt already calls Porsche “a bank with a subsidiary that makes cars.” Wiedeking’s take-home salary is widely guessed at $100m a year, not quite in Wagoner’s league, but close. And considering that G.M. sold 9.4m units in 2007, while Porsche sold a measly 98K of what P.J.O’Rourke called … but you know that by now. What makes the difference: Porsche had a pre-tax gain of €8.6b last year, on sales of just €7.5b, whereas Wagoner … but you know that by now. Will we know tomorrow where Porsche is going?

At the peril of repeating ourselves: We don’t think so. If Volkswagen would be a regular German company, and if Porsche would own 75 percent, then Porsche could book all of VW’s profits as theirs and rule Wolfsburg from Zuffenhausen. But there is that nasty “Volkswagen-Gesetz” which precludes the Porsche power grab. It gives the State of Lower Saxony (holder of 20.1 percent of VW’s shares) veto power. Brussel said it’s illegal. Berlin passed a new “Volkswagen-Gesetz.” Brussels says it’s still as illegal as the old one. Brussels wants to take Berlin to court over it. But the wheels of justice will grind a few years before the matter is settled. Then, there are the workers. The workers are represented in the Supervisory Board and tend to ally with the State of Lower Saxony in matters of keeping jobs and money in Lower Saxony. So, if you would be Porsche, why buy more shares than necessary? Would go against the grain of any true Swabian.

Last Friday, the Supervisory Board of Volkswagen convened, Ferdinand Piech presiding. Piech is part of the Porsche clan, but thickheaded. When Wiedeking suggested that Piech’s pet projects, like the Phaeton or the Bugatti should make some money, Piech was not amused. At Supervisory Board meetings, Piech’s vote is never a given for Porsche. This time, Piech didn’t even need to intervene: The Porsche clan wanted to kill a committee that controls (and in Porsche’s eyes, torpedoes) “business relationships between stockholders” – meaning, at the moment, dealings between Porsche and Audi. The Porsche faction couldn’t get rid of the pesky committee. The factions representing the unions united with the factions representing the State of Lower Saxony and said “nein.”

“Labor representatives forced Porsche to seek board approval from the special committee each time it planned a cooperation with VW’s luxury unit Audi — a potential rival to Porsche’s own business,” said Reuters. “The move to keep the committee came as a surprise on Friday, since Porsche less than a month ago said Volkswagen’s chairman Ferdinand Piech would table a motion to dissolve the committee.” Volkswagen, a world full of surprises.

The committee remains. It will be “optimized.” In VW’s euphemism factory, “optimize” usually stands for “eliminate.” Such doesn’t seem to be the case this time. If Porsche wants to do business with Volkswagen or Audi, or, lo and behold, influence anything (such as Audi’s sports car aspirations,) Porsche must ask the committee. And the committee, loaded with representatives of the unions and Lower Saxony, will go: “Tut-tut, bad boys.”

It looks like there will be many more chapters to this never-ending saga. It doesn’t look like the timetable revealed tomorrow will have many high speed trains in it. At least there was another bit of good news for Porsche today: The Volkswagen stock lost 13 percent at noontime. The VW stock sold for €286.69 at noon. Well on its way to become affordable, even for a Swabian. Automobilwoche asked an analyst of the Norddeutsche Landesbank, and he thinks, €100 or lower would be a fair price. Wendelin Wiedeking would probably agree.