Reunification
What is Dr. Ferdinand Piëch doing with Porsche AG and VW AG? I think the answer is really pretty simple. It's about reunification of the companies that are the legacies of the Porsche and Piëch families.
Let's start with the simple ones. Porsche AG is the legacy of Dr. Ferdinand Porsche's son Ferry Porsche. The rear engine design still used in Porsche's flagship 911 was the brainchild or the Dr. Porsche executed by his son Ferry. The Porsche name and the company's sports cars have always been (and still are) the benchmark for sports car engineering and performance. There is no substitute.
Volkswagen AG is the company that was stillborn at the end of WWII. Hitler had commissioned Dr. Porsche to build "the peoples car" or in German, Volkswagen. The vast factory built for Volkswagen in Wolfsburg, in the German state of Lower Saxony, was bombed and severely damaged by the Allied Forces so the VW Beetle never made it out of the factory.
During the rebuilding of Germany after The War, the British Occupation Authority rebuilt Wolfsburg and gave life to the VW Beetle. VW was one of the major engines in rebuilding the German economy and the Beetle, designed by Dr. Porsche, became the symbol of the new Germany and a source of national pride for Germans. In fact, much of Germany's post-War wealth came from exports of VWs and the reputation for excellence personified by Dr. Porsche.
Auto Union AG is a bit more complicated. Auto Union was born in 1932 with the merger of Audi, Horsch, DKW and Wanderer. Each ring of the Auto Union/Audi logo represents one of the four merged companies. Auto Union was used as a propaganda tool by Hitler and the Nazis to prove the prowess of German engineering and German superiority to the rest of Europe by building the magnificent Auto Union Silver Arrow racers that won races and broke world speed records.
Just before its merger into Auto Union, in 1931, Wanderer engaged Dr. Ferdinand Porsche to design a race car. Dr. Porsche formed his first company: Dr Ing. h.c. F. Porsche GmbH Konstructionsburo Fur Motern, Fahrzeug, Luftfahrzeug, and Wasserfahrzeugbau (Motors, Vehicles, Airplanes, and Boats...). The company was established by Dr. Porsche, Adolf Rosenberger and Dr. Anton Piëch. Anton Piëch, a lawyer, was Dr. Porsche's son-in-law, married to his daughter Louisa. He is also the father of Dr. Ferdinand Piëch, the former and now current chairman of Volkswagen.
At the end of the war, Auto Union was essentially dead. It languished between owners (including Mercedes-Benz) until 1965 when Auto Union became a subsidiary of Volkswagen AG. Then Auto Union-Audi is merged with another German automotive company, NSU, and the company shortened its name to Audi AG in 1971. Whew.
Now let's do a brief history of the Porsche family. Dr. Ferdinand Porsche had two children; his son Ferry (Ferdinand Anton Ernst) and daughter Louisa. His son's nickname was Ferdy; however, his governess didn't like the sound of the name so she changed it to Ferry, then a nickname for Franz!
After the War, Dr. Porsche, Anton Piëch and Ferry Porsche were arrested by the French and imprisoned on war crimes charges. Woops. Piëch Ferry Porsche was released in a few months, but the elder Porsche and Anton Piëch were held in a French prison in Dijon for 20 months until the Porsche family came up with "bail" of 500,000 francs.
While "dad" was languishing in a dank French prison, Ferry Porsche designed the original Type 356. The design of the 356 followed his father's mid-rear engine designed used in the Auto Union racers of the 1930s. His father always said that the 356 was designed the way he himself would have designed it, so Ferry's creation got complete validation from his father.
In 1949, Porsche was hired to design/engineer future projects for Volkswagen and Volkswagen agreed to pay Porsche a royalty for every car built. That was a stroke of good luck, huh?
Porsche also magically secured the distribution rights to VWs in Austria -- where the Porsche and Piëch families still live today. With Porsche's finances in better shape, Ferry and Anton were able to return to Stuttgart and begin full production of the Type 356. The rest, as they say, is automotive history.
While Dr. Piëch was at the helm of VW the first time, he bought and gave life to Bugatti Veyron, a 16-cylinder tour de force that is currently the fastest production car in the world. In my view, the exotic and exquisite Veyron is the modern-day recreation of the Auto Union 16-cylinder racers that ruled racing circuits in the pre-war 1930s.
Dr. Piëch also bought Bentley and set in gear the miraculous rebirth of the brand. The new crop of Bentleys use the platform developed for the Phaeton and the excellent corporate W-12 engine. In LA, so many people bought the stunning Bentley Continental GT Coupe that it almost seems common. The Flying Spur sedan has many customers and the new, beautiful Continental GT Convertible is already cruising around LA. In short, Bentley has become a serious contender in the lofty $100k - $200k sports-luxury market segment previously owned by Mercedes.
Piëch's also an egomaniac and he wasn't able to fully accept the failure of his pet project, the flagship VW Phaeton. He had VW build in a stunning, state-of-the-art glass factory in Dresden to showcase the Phaeton.
Unfortunately the idea of a VW-badged luxury flagship to compete head-to-head with the likes of the Mercedes-Benz S-Class, BMW's 7-Series or even Audi's aluminum-framed A8, just flopped in the US. VW was forced to offer huge incentives and deeply-subsidized leases to get rid of US inventory. The Phaeton was withdrawn from the US market last year and the just-fired VW Chairman Bern Pischetsrieder planned to kill the costly and slow-selling luxo-barge. Woops, that was a fatal mistake as Dr. Piëch was the prime force in firing Dr. Pischetsrieder.
Porsche now owns around 27% of VW's stock. And it may increase its share to 29%. Under German law, if Porsche's holding increase to 30% or more, it would be required to make an offer to buy the entire company. It doesn't look like Porsche will do this as it seems to have sufficient advisory board control to do what it wants with VW.
Long-time Porsche CEO and Porsche/Piëch family confidant Wendelin Wiedeking seems to be the man Porsche wants to steer VW. And it's clear that Dr. Piëch and Mr. Wiedeking share the same views on what VW products and segments VW should focus on and how it should all be managed. It's also likely that Audi will work more closely with Porsche for numerous engineering and technology projects.
The reunification of the Porsche family car companies is nearly complete. In addition, the strength and size of VW will ensure the future of Porsche's legendary sports cars. It will also ensure that no hostile US-style takeover will threaten VW and its German ownership.
BMW is secure against outside interests as the Quandt family controls the BMW Empire which includes the MINI and Rolls Royce brands. No one wants to see the mess that is DaimlerChrysler again. It's like the hallowed Mercedes brand is forever tarnished by the Chrysler stepchild. But it's more than just nationalistic protectionism for the Porsche/Piëch families. Auto Union/Audi, Porsche and VW are all companies that owe their very existence to Dr. Ferdinand Porsche and his son Ferry. It is their family legacy and it's now protected and reunified.
