Case Study Vw/Porsche

Topics: Porsche, Volkswagen, Volkswagen Group Pages: 24 (7446 words) Published: March 7, 2013
Volkswagen and Porsche
One Family, Two Car Companies, & a Battle for Corporate Control Dr. Heike Nolte University of Applied Sciences Emden-Leer Constantiaplatz 4 26723 Emden, Germany Tel: +49 4921 807 1007 Fax: +49 4821 807 1228 Dr. Alva Wright Butcher School of Business and Leadership University of Puget Sound 1500 N. Warner St. #1032 Tacoma, WA 98416-1032 Tel: 253- 879-3349 Fax: 253-879-3156 Supported by a 2011 NIBEN Curriculum Development Grant September 2011

Volkswagen and Porsche: One Family, Two Car Companies, & a Battle for Corporate Control

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Introduction Over the past several years, Porsche and Volkswagen have been involved in a saga that is stranger than fiction. It started by the attempt of the small car manufacturer Porsche to take-over Europe's biggest auto firm Volkswagen and finally turned Porsche into Volkswagen's "brand # 10". On the way, hedge-funds lost a fortune, Porsche earned more revenues from financial transactions than from producing cars, one part of the IG Metall union fought against another part of the same union, the German parliament passed a law which was very similar to a law that had been dismissed by the European Union Court of Justice. How could this saga of events happen? What led to a complete turnaround in this battle for corporate control? Figure 1 presents a timeline of some of the key events in this takeover battle.

History Volkswagen – the Peoples Car In 1934, Hitler announced that he wanted the German automobile industry to build an affordable car for the people. He wanted a car that could seat four people, get 40 miles to the gallon, and cost no more than 1000 Marks (or around $250).1 The engineer who submitted the best design and was awarded the contract was Ferdinand Porsche. A new firm was founded whose only purpose was to produce the common people’s car, the “Volkswagen”. Porsche was appointed to the supervisory board, while his son-in–law, Anton Piëch, became the first manager of the new production site, which was located in a newly founded town in the center of Germany, today known as Wolfsburg. This town is still the firm’s headquarters. The plant was almost completed when World War II started in fall 1939. Instead of producing cars, the facility was converted to war production, and it was not until the end of the war that the first Volkswagen was built. By this point Wolfsburg and its auto production plant was under control of the British occupational forces. The British helped to start the production of the Volkswagen Beetle, even though the patents were still held by Ferdinand 1 Classic Cars, Retrieved from

Volkswagen and Porsche: One Family, Two Car Companies, & a Battle for Corporate Control

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Porsche’s engineering firm. Figure 2 presents one of the first advertisements for Volkswagen. At that time it had the Nazi name, KdF-Wagen. The text in the 1939 advertisement translates as “5 marks a week you must save if you want a car of your own.”

The financial side of the Volkswagen story began even earlier than its engineering and production. The company was financed by union assets that had been seized in 1933. Although a savings plan had been set up to help working class households purchase a car, most of their savings were lost during the war. In 1949 the British occupational forces handed Volkswagen over to the state of Lower Saxony, where the factory was located, and ruled that the state should govern Volkswagen together with the other states of the new Federal Republic of Germany. The unions also obtained a governance role as compensation for their assets that had been seized in 1933.

Porsche Porsche, the firm widely known as a sports car manufacturer today, had been...
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