Interview with Porsche Chairman Wendelin Wiedeking about VW & Porsche
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Interview with Porsche Chairman Wendelin Wiedeking about VW & Porsche
http://www.businessweek.com/au...0.htm
Porsche and VW: Forward Together
Porsche's chairman discusses the sports-car maker's plan to boost its stake in Volkswagen and what it means for the two German companies
Perhaps the most important executive in Volkswagen's future is Porsche Chairman Wendelin Wiedeking. That's because Porsche, which already owns 27.4% of Volkswagen, is preparing to run its stake up to 29.9% in the coming months, assuming German courts overturn a current law that would prevent Porsche from raising its controlling interest above 20%.
Volkswagen Chairman Martin Winterkorn is expected to lay out a "go forward" plan for Volkswagen at a supervisory board meeting on Jan. 10. Wiedeking is currently one of two VW board members who will hear the plan. The Porsche chairman didn't provide a lot of details about what he expects, but he did talk at length with BusinessWeek Detroit correspondent David Kiley about how he sees the future of Volkswagen and Porsche under allied management.
What do you envision Porsche getting out of its relationship with Volkswagen as a controlling shareholder?
We want to keep Porsche independent. It will be completely different from all the other VW brands. That's a must. Everybody knows that all the new technologies you have to use for the environment and safety are getting much more expensive. You need partners willing to share technologies and thinking. VW wanted a long-term partner. Our pockets were completely filled. So we had a decision to make. To pay out a lot of special dividends or spend some $3 billion to acquire VW shares.
We are the major shareholder now. We have a lot of influence. We will work much closer now. And it will make both companies much more efficient. We already have a lot of long-term projects. Electronics alone is getting to be about 30% to 35% of material costs in a vehicle. That is probably the most promising area for us to save a lot of money by working closely together. Our gain on the investment side has already paid off very well. The stock is up 100% in a year.
Is a merger between Porsche and Volkswagen in the cards?
No. If you try to merge a small company with a big company, it won't work. It's not good because the cultures are so different. We want to keep Porsche independent. So, it's a question of how we want to manage this relationship. This will be done at the level of the supervisory board. We will make things happen, but not at the operating level. That's really the only way to do it.
How is your relationship with Dr. [Ferdinand] Piech [supervisory board chairman of Volkswagen and part of the Porsche/Piech families who control 100% of Porsche voting shares]? He is not known for being very responsive to shareholders and investors.
I am responsive to shareholders and investors. That's my job. I know how to make money. I am responsible not for just Porsche, but, as a member of the supervisory board, for the rest of shareholders, too. I will make sure we are making money in our investment in VW. I will do this. Believe me. I will make sure we are making enough money for Porsche. Profit is a bigger priority. And that means there will have to be a lot of changes in the VW organization.
The culture at VW must change. There must be an aggressive change in productivity. Everyone knows this. I know from the Works Council that they will accept changes that have to be made. They have started already. They know this and they are willing. VW is a gold mine. The only thing is that you have to dig day and night.
Does that mean job losses at VW?
Yes and no. On one hand, VW employees are taking payments to leave. That is going on. Second, we have to look for new opportunities for products to give the workers we have more to do. There's no doubt about that. There is a huge potential for productivity increases. Otherwise, it will be a disaster. Productivity means more products, fewer employees. This is worldwide. In Brazil, we have increased productivity dramatically.
You are confident that the so-called German VW law, which would prevent you from controlling more than 20% of the company, will be overturned?
This is practically assured. We will know in February. But this law is against European Union rules.
Will Dr. Piech's term as chairman of the supervisory board be extended? Will he seek another term?
I don't want to get into this. The meeting at which that will be voted on isn't until April. And I'd like to know in February how the court is acting on the other issue.
Can you explain why a change of CEO was needed? Why Bernd Pischetsrieder's resignation was sought at Volkswagen?
This is a discussion that's not good for the public. [It was] different visions for the company. But it doesn't make sense to discuss this in detail.
How do you view Volkswagen in America?
The products are very good. But VW needs to do better at meeting price points. That means you have to be more productive. That's good news. It's not a company without chances to meet the worldwide target for sales. If we were already leading, and didn't have the opportunity to improve, that would be a problem. I believe there is low-hanging fruit here. Remember Porsche 40 or 50 years ago? We were almost bankrupt. The stock price was [the equivalent of] €19. Yesterday, it was €1,015. This happened because the company was a gold mine. [It's the] same situation with Volkswagen.
Can you envision running both Porsche and Volkswagen the way Carlos Ghosn runs both Renault and Nissan?
No. I think the supervisory board is the best place for me to influence Volkswagen. It's impossible to do with two companies, especially with one the size of Volkswagen. I think Mr. Ghosn spends a lot of time on jets going back and forth between Japan and France, maybe more time than he has to spend in front of the marketplace. There is the cultural distance, too. In some ways it would be easier for me, because both companies are at least in Germany. But no.
Can you be specific about some of the possibilities you see for VW?
You have to offer the public the right products. VW products now, such as they are, are O.K. It is missing some product possibilities in the market. It needs to be more aggressive on pricing to boost sales volume, especially in the U.S. market. That's our potential. There is great potential in the U.S. for higher market share and to be more competitive.
Does VW need another factory in North America?
It has one in Mexico. We may look at this, but it will take time. We just decided to build a factory in Russia. [We have] one in India. Now we are ready to invest. The U.S. market is the biggest market in the world. We need to be smart here.
Does VW have too many brands?
The brand portfolio is O.K. Every product we come out with has to make money. That is for certain. No executive toys. This is a rule.
If Porsche is taking control of VW, then why shouldn't other shareholders expect to be paid a premium for their shares?
Why should I pay a premium? No. I don't see any reason for this, 29% is enough for Porsche. We won't acquire more than 50%. It's not my job to take care of fund investors [who complain about this]. Many of them have already made out very well with the runup in the share price.
Does VW have plans for playing in the sub-$10,000 car market?
Why not? We have an extensive investment in China. Why shouldn't we use it to make cars to export outside China? There is opportunity to do this. We have plants around the world. Toyota is doing it. Why shouldn't we do it? The India plant is a potential for this, too.
Does your China strategy need to be revised?
The Audi business there is way up. It's doing very well. But China is a market like any other where you have to match the right products to the market. I believe the former management made the wrong decision on the product they offered in China. The Chinese people want big cars that seat four or five at least. Not a small car. They want something special. It was incorrect to send the Polo to China and then hope that the Chinese will fall for your small car. That's it.
How are you going to cope with alternative energy and maintain Porsche's sports-car performance?
At the moment there isn't an alternative to gasoline for us. To keep our models at today's price ranges, you have to use today's technologies. Diesel isn't the answer for us even. We don't use it in the Cayenne. Diesels are much heavier. It doesn't drive like a Porsche should with a diesel. Gasoline engines are our philosophy for the time being.
Porsche and VW: Forward Together
Porsche's chairman discusses the sports-car maker's plan to boost its stake in Volkswagen and what it means for the two German companies
Perhaps the most important executive in Volkswagen's future is Porsche Chairman Wendelin Wiedeking. That's because Porsche, which already owns 27.4% of Volkswagen, is preparing to run its stake up to 29.9% in the coming months, assuming German courts overturn a current law that would prevent Porsche from raising its controlling interest above 20%.
Volkswagen Chairman Martin Winterkorn is expected to lay out a "go forward" plan for Volkswagen at a supervisory board meeting on Jan. 10. Wiedeking is currently one of two VW board members who will hear the plan. The Porsche chairman didn't provide a lot of details about what he expects, but he did talk at length with BusinessWeek Detroit correspondent David Kiley about how he sees the future of Volkswagen and Porsche under allied management.
What do you envision Porsche getting out of its relationship with Volkswagen as a controlling shareholder?
We want to keep Porsche independent. It will be completely different from all the other VW brands. That's a must. Everybody knows that all the new technologies you have to use for the environment and safety are getting much more expensive. You need partners willing to share technologies and thinking. VW wanted a long-term partner. Our pockets were completely filled. So we had a decision to make. To pay out a lot of special dividends or spend some $3 billion to acquire VW shares.
We are the major shareholder now. We have a lot of influence. We will work much closer now. And it will make both companies much more efficient. We already have a lot of long-term projects. Electronics alone is getting to be about 30% to 35% of material costs in a vehicle. That is probably the most promising area for us to save a lot of money by working closely together. Our gain on the investment side has already paid off very well. The stock is up 100% in a year.
Is a merger between Porsche and Volkswagen in the cards?
No. If you try to merge a small company with a big company, it won't work. It's not good because the cultures are so different. We want to keep Porsche independent. So, it's a question of how we want to manage this relationship. This will be done at the level of the supervisory board. We will make things happen, but not at the operating level. That's really the only way to do it.
How is your relationship with Dr. [Ferdinand] Piech [supervisory board chairman of Volkswagen and part of the Porsche/Piech families who control 100% of Porsche voting shares]? He is not known for being very responsive to shareholders and investors.
I am responsive to shareholders and investors. That's my job. I know how to make money. I am responsible not for just Porsche, but, as a member of the supervisory board, for the rest of shareholders, too. I will make sure we are making money in our investment in VW. I will do this. Believe me. I will make sure we are making enough money for Porsche. Profit is a bigger priority. And that means there will have to be a lot of changes in the VW organization.
The culture at VW must change. There must be an aggressive change in productivity. Everyone knows this. I know from the Works Council that they will accept changes that have to be made. They have started already. They know this and they are willing. VW is a gold mine. The only thing is that you have to dig day and night.
Does that mean job losses at VW?
Yes and no. On one hand, VW employees are taking payments to leave. That is going on. Second, we have to look for new opportunities for products to give the workers we have more to do. There's no doubt about that. There is a huge potential for productivity increases. Otherwise, it will be a disaster. Productivity means more products, fewer employees. This is worldwide. In Brazil, we have increased productivity dramatically.
You are confident that the so-called German VW law, which would prevent you from controlling more than 20% of the company, will be overturned?
This is practically assured. We will know in February. But this law is against European Union rules.
Will Dr. Piech's term as chairman of the supervisory board be extended? Will he seek another term?
I don't want to get into this. The meeting at which that will be voted on isn't until April. And I'd like to know in February how the court is acting on the other issue.
Can you explain why a change of CEO was needed? Why Bernd Pischetsrieder's resignation was sought at Volkswagen?
This is a discussion that's not good for the public. [It was] different visions for the company. But it doesn't make sense to discuss this in detail.
How do you view Volkswagen in America?
The products are very good. But VW needs to do better at meeting price points. That means you have to be more productive. That's good news. It's not a company without chances to meet the worldwide target for sales. If we were already leading, and didn't have the opportunity to improve, that would be a problem. I believe there is low-hanging fruit here. Remember Porsche 40 or 50 years ago? We were almost bankrupt. The stock price was [the equivalent of] €19. Yesterday, it was €1,015. This happened because the company was a gold mine. [It's the] same situation with Volkswagen.
Can you envision running both Porsche and Volkswagen the way Carlos Ghosn runs both Renault and Nissan?
No. I think the supervisory board is the best place for me to influence Volkswagen. It's impossible to do with two companies, especially with one the size of Volkswagen. I think Mr. Ghosn spends a lot of time on jets going back and forth between Japan and France, maybe more time than he has to spend in front of the marketplace. There is the cultural distance, too. In some ways it would be easier for me, because both companies are at least in Germany. But no.
Can you be specific about some of the possibilities you see for VW?
You have to offer the public the right products. VW products now, such as they are, are O.K. It is missing some product possibilities in the market. It needs to be more aggressive on pricing to boost sales volume, especially in the U.S. market. That's our potential. There is great potential in the U.S. for higher market share and to be more competitive.
Does VW need another factory in North America?
It has one in Mexico. We may look at this, but it will take time. We just decided to build a factory in Russia. [We have] one in India. Now we are ready to invest. The U.S. market is the biggest market in the world. We need to be smart here.
Does VW have too many brands?
The brand portfolio is O.K. Every product we come out with has to make money. That is for certain. No executive toys. This is a rule.
If Porsche is taking control of VW, then why shouldn't other shareholders expect to be paid a premium for their shares?
Why should I pay a premium? No. I don't see any reason for this, 29% is enough for Porsche. We won't acquire more than 50%. It's not my job to take care of fund investors [who complain about this]. Many of them have already made out very well with the runup in the share price.
Does VW have plans for playing in the sub-$10,000 car market?
Why not? We have an extensive investment in China. Why shouldn't we use it to make cars to export outside China? There is opportunity to do this. We have plants around the world. Toyota is doing it. Why shouldn't we do it? The India plant is a potential for this, too.
Does your China strategy need to be revised?
The Audi business there is way up. It's doing very well. But China is a market like any other where you have to match the right products to the market. I believe the former management made the wrong decision on the product they offered in China. The Chinese people want big cars that seat four or five at least. Not a small car. They want something special. It was incorrect to send the Polo to China and then hope that the Chinese will fall for your small car. That's it.
How are you going to cope with alternative energy and maintain Porsche's sports-car performance?
At the moment there isn't an alternative to gasoline for us. To keep our models at today's price ranges, you have to use today's technologies. Diesel isn't the answer for us even. We don't use it in the Cayenne. Diesels are much heavier. It doesn't drive like a Porsche should with a diesel. Gasoline engines are our philosophy for the time being.
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