July 23, 2009 / 11:08 AM / 10 years ago

VW chairman Piech gets upper hand

FRANKFURT (Reuters) - Volkswagen chairman Ferdinand Piech tightened his grip over Porsche on Thursday after the sportscar maker’s chief executive was ousted following a power struggle to keep Porsche independent.

Porsche’s board, of which Piech is a member, axed Wendelin Wiedeking in the early hours of Thursday morning, removing a key obstacle to the sale of Porsche’s sportscar business to VW.

Porsche abandoned an audacious takeover attempt of Volkswagen after it ran up more than 10 billion euros ($14 billion) in debt. The Stuttgart-based auto maker was instead forced to negotiate a merger with VW but repeatedly clashed with Volkswagen’s chairman about the terms of such a deal.

The Porsche board also proposed raising 5 billion euros in equity to prepare for the integration process.

Wiedeking’s ouster underlines Piech’s skill as a tactician whose ability to outmaneuver rivals and allies has seen him steadily grow his influence at VW and Porsche during a 46-year career in the auto industry.

It also marks a crucial step toward adding a tenth brand to an automotive empire built by Piech that includes low-end, mass-market and luxury carmakers as well as trucks, and holds the VW, Bentley, Bugatti, Skoda, Audi and Scania brands.

Piech’s career might then eclipse that of his illustrious grandfather Ferdinand Porsche, who founded Porsche and designed the original VW Beetle.

The deal still requires negotiation, but Piech looks set to dictate the terms for creating an “integrated” company.

Piech has often been underestimated because he tends to keep employees and business partners in the dark, leaving them to guess his next move, people who have worked for him said.

While development chief at Audi, he had different teams work on the aerodynamics of the Audi 100, using wind tunnels in Hamburg, Stuttgart, Wolfsburg and Turin to complete parts of the development. He had the results of tests sent to Ingolstandt, where Audi is headquartered.

“I was in the middle of it all, putting together the pieces of the puzzle,” he said in his autobiography.

SOFTLY SPOKEN BUT ASSERTIVE

Getting hold of Porsche would also mark a return of Piech’s management influence at Porsche, where he spent nine years of his career before quitting as board member for research and production in 1971.

At the time, Porsche’s owning families, his relatives, decided they didn’t want a family member to lead the Stuttgart-based maker of the iconic 911 sportscar.

Although Piech’s aspirations for leading Porsche were dashed in the 1970’s, he went on to hold senior positions at Audi and Mercedes-Benz before rising to become Volkswagen’s chief executive in 1993 and eventually chairman in 2002.

In recent months Piech has stepped up a campaign to assert his influence over Porsche, both as a shareholder himself and as head of Volkswagen, one of Porsche’s most important suppliers.

Though softly spoken, Piech is unfazed by tension, and often encourages rivalries, people who have worked for him say.

“It’s not possible to take a company to the top by focusing on the highest level of harmony,” he said in his autobiography.

Because the Piech clan controls just under half the votes in Porsche, and the owning families need 75 percent approval for major decisions, Piech’s side of the family retains a veto even at Porsche.

Piech also underlined Volkswagen’s control over Porsche in 2008 by helping to block a cooperation deal that would have given Porsche access to VW’s technologies. Piech later voted in favor of the cooperation, but only after infuriating his cousin, Wolfgang Porsche, the Porsche chairman.

Porsche is heavily dependent on Volkswagen, which delivers or assembles components for a third of all Porsche cars, including the body and engine for the four-door Panamera and Cayenne luxury offroader models.

A PRODUCT PERSON

Piech is widely admired for his intimate knowledge of engineering. He helped to revive Volkswagen by developing a modular construction system that saves costs by allowing several different cars to share the same underpinnings.

But Piech clashed with shareholders and some of his own managers for putting the brakes on cost cutters and betting instead on quality improvements and technical innovations in the hope that higher profits would follow.

“I have always primarily felt like a product person ... Economics and politics have never been able to distract me from the core of our business: to develop and make attractive cars,” he said in his autobiography.

Piech has relied on the support of labor leaders to keep his career alive at VW, sometimes even at the expense of executives he himself had appointed.

Wolfgang Bernhard a former Daimler and Chrysler executive and head of the VW brand, and Bernd Pischetsrieder, VW’s CEO, both left the company after Piech backed union leaders who sought to limit cost cutting measures at VW.

Under Piech’s watch, VW bought the Bentley, Bugatti and Lamborghini brands in a single year.

He also pushed the VW brand upmarket by developing the VW Phaeton, and the unprofitable Bugatti Veyron, a move that ultimately put him on a collision course with Wiedeking, who thought Piech was squandering VW’s money on “vanity projects.”

(Reporting by Edward Taylor, editing by Will Waterman)

$1=.7039 Euro

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