September 14, 2008

Porsche Clan Shows Rare Discord on VW

By Jan Christoph Schwartz

The Volkswagen chairman, Ferdinand Piech, broke ranks with Porsche, a company controlled by his extended family, by tacitly backing VW employees in a boardroom showdown as thousands protested outside.

A person briefed after the board meeting Friday said that Piech was not present during a VW supervisory board vote, allowing 10 members from the carmaker's labor unions to outvote the nine remaining shareholder representatives - including three Porsche executives - on a motion concerning VW's premium unit, Audi.

The defeat for Porsche - Volkswagen's largest shareholder - means it will need approval from the VW supervisory board for any form of cooperation with Audi.

Audi, Volkswagen's luxury brand, is a potential competitor to Porsche because Audi makes sporty cars like the TT Roadster and the R8 high-performance coupe, which rival the Porsche Boxster and 911.

Wolfgang Porsche, the Porsche chairman, who also sits on the VW board, attacked his cousin in a magazine interview, in a rare show of divisions between the Porsche and Piech clans.

"I am horrified by the behavior of the chairman," he was quoted as saying of Piech in the German Focus magazine. A preview of the article was released ahead of publication Monday.

The squabble took place as VW staff staged one of the biggest protests in the carmaker's history to support a German law giving labor and the state government a big say at VW, which has passed Ford Motor to become the No. 3 global automaker.

Both the European Commission and Porsche, which is poised to lift its VW stake to a majority, oppose the so-called VW law. It gives the state of Lower Saxony extra power to shape company strategy with its share-holding of just over 20 percent.

The union IG Metall said 40,000 Volkswagen workers from inside and outside Germany protested near the company's Wolfsburg headquarters. They were joined by staff from MAN, the truck manufacturer in which VW holds a large stake.

"In times of shareholder value and finance market-driven capitalism we need more, not fewer, VW laws in our country," IG Metall's leader, Berthold Huber, shouted in a passionate address to the noisy demonstration.

After the EU's highest court ruled in October that the 48-year- old law violated EU rules on the free flow of capital and needed changing, the German government made changes aimed at satisfying concerns in Brussels.

But those changes were rejected as insufficient by the EU's internal markets commissioner, Charlie McCreevy, who is threatening to lodge another complaint.

This week, Lower Saxony's prime minister said the state would raise its stake in Europe's biggest carmaker to 25 percent to retain its blocking minority if necessary.

Originally published by Reuters.

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