Editorial: Ferdinand Piech: The Godfather, Part 1

Hakan Samuelsson thought he had it all figured out. In 2006, the CEO of German commercial truck manufacturer MAN schemed to take over his former employer and Swedish rival, Scania. He had the banks behind him. VW owned 30 percent of Scania; they had to agree to the takeover. And why not? Volkswagen had no use for Scania, as VW’s commercial truck division only operates in South America. So Hakan Samuelsson made a deal with Bernd Pischetsrieder, then head of Volkswagen. Unfortunately for Mr. Samuelsson, he talked to the wrong guy. Ferdinand Piech, the person pulling the strings over in Wolfsburg, had different plans . . .

Before we get to what happened, let‘s take a small detour and look at where Piech‘s story began.

In fact, let‘s begin with his grandfather Ferdinand Porsche, one of the most gifted engineers in the history of the automobile. Before he founded the car company that not only carries his name but also his title, Porsche was a freelance engineer. Amongst other things, Porsche constructed the first hybrid car in 1900, and, most significantly, the VW Beetle.

When Porsche got into legal trouble with Daimler-Benz over a contract in the 1920s, he hired Anton Piech, a young lawyer from Vienna. Piech soon became his son-in-law and, later, Porsche’s business partner. During the war years, Anton Piech headed the Volkswagenwerk G.m.b.H., the precursor of Volkswagen. After the war, he was CEO of the Porsche Holding, one of Europe‘s biggest car dealing networks, specializing in Volkswagen and Porsche cars.

No wonder, then, that young Ferdinand Piech grew up with a sense of entitlement. Like his grandpa, Piech became an engineer (he‘s proud that he‘s not one of those MBA guys running a car company). Piech‘s Master Thesis was on the development of a Formula 1 engine. When he entered the “Dr. Ing. h. c. F. Porsche AG” in 1963, he soon climbed in rank.

During his time at Porsche, Piech’s most noteworthy accomplishment was probably the development of the iconic Porsche 917 race car and Le Mans winner. Legend says that after the completion of the first prototype, he crawled underneath the 917 equipped with a magnet and wherever this magnet would cling to the car, he ordered his engineers to replace that part with something lighter.

By 1971, Piech was director of engineering and a hot prospect for CEO. However, dark clouds were gathering over Piech’s career. The Porsche and Piech halves of the family (each of which held 50 percent) became increasingly fractious. In 1972, the Porsche family decided that no family member (from either side) should be involved in company’s day-to-day operations. Ferdinand Piech’s uncle Ferry Porsche stepped down as CEO. All remaining family members also left the company for a back seat on the supervisory board.

Piech’s ambitions had been thwarted.

So Piech left the sanctuary of the family to earn his spurs at Audi, the same company for which his famous grandfather designed the legendary Auto Union Type C racing car. Piech worked in the R&D department where he masterminded the development of the famous Audi S1 rally car. Piech became a key figure in re-inventing Audi. He introduced the TDI and Quattro drive—making them Audi trademarks—and slowly turned Audi into a legitimate Mercedes/BMW competitor. Ferdinand Piech was appointed CEO of Audi in 1988.

While Audi was doing increasingly well, parent company Volkswagen ran into deep problems. Piech was called to the rescue. In 1993, he took over Europe’s biggest car manufacturer. Problem. To rule Volkswagen, you need to be more than an engineer. You need to be a politician. Volkswagen was controlled by the state of Lower Saxony and the Unions. Piech, ever the alpha dog, needed to learn the art of consensus.

Piech turned out to be a master in building networks and majorities to support him. By the time he had to retire as CEO in 2002 because of age constraints, Piech had placed his guys into every powerful position and earned the support of the government and the unions. Many newspaper editorials hailed the retirement of this absolutist monarch of Volkswagen, but they didn’t see the whole picture. Piech was still in charge.

So what happened to MAN and Scania? Pischetsrieder labored under the illusion he was running the show. When Piech found out about the Scania deal, he was fuming as he wasn’t consulted about the proposal in advance. For this act of treachery, Pischetsrieder had to go. With support of the unions, Piech sacked Pischestreider. Then, instead of selling VW’s share in Scania, VW went on to buy a 30 percent share in MAN—as well as the remaining Scania stocks owned by the Swedish Wallenberg family. Don Piech made them an offer they couldn’t refuse.