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Porsche power struggle intensifies as earnings hit a wall

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Porsche power struggle intensifies as earnings hit a wall
Photo: DPA
10:41 CEST+02:00
A power struggle between Volkswagen chairman Ferdinand Piëch and Porsche's management continued to intensify on Friday, just as the company announced that sales had crashed 15 percent.

Porsche CEO Wendelin Wiedeking and Piëch have been exchanging increasingly nasty words in recent days, the daily Süddeutsche Zeitung reported Friday. Piëch blames Wiedeking for increasing the company's mountain of debt, now around €9 billion, in a failed attempt to take over Volkswagen.

Wiedeking, in turn, has said Piëch has harmed the company with his public criticisms at a sensitive time when the two companies are discussing a merger. Piëch is the grandson of Porsche founder Ferdinand Porsche and left a career at the company to work for Volkswagen in the 1990s.

In a letter to Piëch dated May 13, cited by the newspaper, Wiedeking warned Piëch that he would be help “personally responsible” if Porsche were harmed by Piëch's verbal assaults.

In the rarified world of German boardrooms, such strong language is almost unheard of and reflects the complex pressures brought on by rivalries between the Piëch and Porsche clans, collapsing car sales, industry consolidation and a credit crunch brought on by the financial crisis.

The sports car maker has now turned to a government loan program for help and has requested a €1.75 billion line of credit to help Porsche restructure its debt. A decision by the government could come within days. Porsche is also in negotiations to sell a major stake, likely 25 percent, of the company to an investment fund owned the government of Qatar.

Sales figures released by the company Friday show that Porsche's situation is becoming desperate. Sales fell 15 percent in the first nine months of Porsche's fiscal year to €4.6 billion euros. Porsche said its operating profit was also less than in the same period a year earlier, but did not provide figures.

"A look at global unit sales makes clear that no region is being spared the sharp decline in automobile markets," a statement said.

Deliveries fell 27.6 percent to 53,635 vehicles on a 12-month basis, as luxury cars in particular paid a price for weaker consumer sentiment. At Porsche, sales of its iconic 911 model fared much better than that of the Cayenne sports utility vehicle, but were still off by 18.2 percent.

Looking ahead, the company declined to give a precise forecast but said sales were likely to fall below the level in its previous fiscal year.

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