Porsche CEO steps down, making way for VW merger

[July 23, 2009]  STUTTGART, Germany (AP) -- Porsche chief executive Wendelin Wiedeking is leaving the luxury sports car maker after 16 years at the helm, a move widely expected to clear the way for a merger with Volkswagen AG.

The board for Porsche Automobil Holding SE said Thursday that Wiedeking, 56, and chief financial officer Holger Haerter, 53, were leaving with immediate effect from the heavily indebted company that makes the 911, among other models.

The move -- along with the announcement that Porsche will seek to raise funds, possibly from a Qatar investor -- is expected to make it easier for Volkswagen and Porsche to merge, given that Wiedeking, who had been CEO since 1992, opposed such a move.

"The measure shall create the foundation of building an integrated car manufacturing group with Porsche SE and Volkswagen AG," a company statement said.

Ferdinand Dudenhoeffer, an expert on the automotive industry at the University of Duisberg-Essen, called any merger "a done deal" and said that "Qatar will now get on board in order to master the financial burden."

Porsche is grappling with some euro9 billion in debt it accumulated while building up a stake in Volkswagen in an unsuccessful takeover attempt.

Reaction to the announcement was met with skepticism by investors, who pushed Volkswagen shares down 2.6 percent to euro245.37 though Porsche shares were up nearly 1 percent euro52.09.

Wiedeking will be replaced by Michael Macht, 48, who currently oversees production, while personnel chief Thomas Edig will serve as his deputy, the board said.

VW and its chairman, Ferdinand Piech, have been pushing for a deal that would see it take 49 percent of Porsche and fold the lucrative luxury-car business into its portfolio, widening its range in anticipation of a recovery in the luxury market.

Piech also is part of the family that controls Porsche.

Wolfsburg-based VW, Europe's biggest carmaker by sales, said its board was meeting Thursday, but did not immediately comment about the moves at Porsche or what the topics of the meeting were.

At stake is who will control what would be Germany's most powerful automaker -- Volkswagen or Porsche.

The head of Porsche SE's supervisory board, Wolfgang Porsche, who also sits on VW's board, told reporters in Stuttgart that "everything is wonderful" as he arrived for the meeting.

Porsche's top employee representative felt otherwise. "We will not be sold," said Uwe Hueck, the head of Porsche's works council. Porsche employs some 10,000 people, while Volkswagen, whose brands include VW, Audi, Seat, Skoda, Bentley, Bugatti and Lamborghini, employs some 370,000 workers worldwide.

Willi Diez, director of the Institute for Automobile Research in Nuertingen-Geislingen, told Deutschlandradio that a merger would definitely benefit the families that control Porsche.

"In the end, both companies and both families want to keep their fortune and multiply it, and this will weld them together," he said.

Christian Wulff, the governor of the German state of Lower Saxony, which holds approximately 21 percent of VW, called on both companies to work together.

"We'll set off together to become the number one in the world," he said.

Porsche said Wiedeking would receive euro50 million (nearly $71 million) as he leaves, far below the reports of euro140 million or even euro250 million that German media had speculated. Wiedeking's contract was set to expire in 2012.

Porsche said Haerter, 53, would receive euro12.5 million, though both executives might see more compensation through other agreements or bonuses.

"Wiedeking and Haerter came to the conclusion in the last week that the further strategic development of Porsche SE and Porsche AG would be better when they were no longer the responsible people on the board," the company said.

Porsche announced the moves after an all-night meeting on its future that saw the board agree to seek a capital increase of at least euro5 billion and throw its weight behind talks with a Qatar investment fund.

About the talks with Qatar, Porsche spokesman Albrecht Bamler said the supervisory board agreed to sign a deal with a Qatar investment fund, with which negotiations have been ongoing, Bamler said.

He did not provide any more detail and would not say whether the euro5 billion capital increase would come from Qatar, or if it was in addition to what was being sought from the fund.

Wiedeking joined Porsche in 1983, working in the car maker's production and materials management unit and left the company in 1988 for supplier Glyco Metall-Werke KG, where he rose to chief executive in 1990. The next year, he returned to Porsche as production director and became CEO in 1993.

He was hailed for streamlining Porsche's operation and production, but his David-and-Goliath effort, beginning in 2005, to take over the much larger Volkswagen ultimately felled him. Porsche eventually acquired 51 percent and -- until the end of last year -- was hailed for the move.

However, the global economic crisis put the brakes on luxury car sales -- hampering Porsche's push to increase its VW stake to 75 percent and take full control. It had also counted on the European Union to strike down a German law that gives the state of Lower Saxony, which holds just around 20 percent, unparalleled power to veto any changes or decisions.

Porsche tied up so many VW shares that, when traders needed shares in October to cover bets they had made against the stock, a so-called short-squeeze briefly pushed VW shares so high that it was, for a few days, the world's most valuable company.

Porsche slammed on the brakes earlier this year, announcing its intention to create an "integrated company" with VW but leaving unclear how that might happen. Volkswagen balked and talks soon screeched to a halt.

[Associated Press; By OLIVER SCHMALE and MATT MOORE]

Moore reported from Berlin. AP Business Writer George Frey in Frankfurt and Associated Press Writer Kirsten Grieshaber in Berlin contributed to this report.

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