Wendelin Wiedeking

Wendelin Wiedeking: The Engineer Who Bet the Company

"Every product must earn money," he told an interviewer in 2006. "Otherwise you are simply pursuing a hobby." By then the line sounded like a boast, because Wendelin Wiedeking had taken a sports-car maker worth about €300 million and turned it into one worth €25 billion. Two years later he tried to swallow Volkswagen — a company many times Porsche's size — using stock options, and the whole edifice came down on top of him.

An Engineer, Not a Financier

Wiedeking was born on 28 August 1952 in Ahlen, Germany, and grew up in Beckum. He went to RWTH Aachen, Germany's great engineering university, graduated in 1978, and stayed on to take a doctorate in engineering in 1983. Nothing about the training was commercial. He was formed as a production man, and production is where he entered Porsche the same year, in the unglamorous role of director's assistant in production and materials management.

He left to run the metals firm Glyco Metall-Werke from 1988 to 1991 — a spell in the component supply trade, where cost discipline is not optional. Porsche brought him back in 1991 as production director.

A Company Two Years From Gone

In 1993, aged forty, Wiedeking became chairman and chief executive. Porsche was close to bankruptcy. It was a boutique manufacturer with a bloated model range, obsolete production methods and a cost base built for a market that had evaporated.

His response was brutal and fast, and it took about two years. He killed the 928 and the 968, which did not make money. He rebuilt the 911, the one car that defined the brand and could not be allowed to fail. And he rewrote the factory.

Toyota, Imported

The intellectual move that made Wiedeking's reputation was to apply lean manufacturing on the Toyota model inside a German luxury marque — an act of considerable humility for an industry that regarded Japanese methods as suitable for mass-market economy cars, not for hand-built German sports cars. Inventory came down, workflow was rationalised, waste was hunted. He simultaneously negotiated new agreements with the unions, which is the part most reformers cannot do.

The result was that Porsche became, by the standard measures, one of the most efficient carmakers in the world — and, per car, the most profitable.

Two Cars That Should Not Have Worked

Wiedeking's product bets were as heterodox as his factory. The Boxster convertible, developed under him, gave Porsche an entry model that shared parts with the 911 and widened the customer base without cheapening the badge.

The Cayenne was the true heresy. A Porsche sport-utility vehicle offended every purist, and Wiedeking built it anyway — and built it cleverly, negotiating a partnership with Volkswagen so the Cayenne and VW's Touareg shared development. It made an enormous amount of money. Purists were still complaining about it while the profits from it were financing everything else.

By 2007 Porsche's market value had gone from roughly €300 million to €25 billion. Wiedeking was rewarded accordingly: he was reported to have been paid more than €70 million in 2007, which made him the highest-paid chief executive in Europe.

The Volkswagen Trap

Then Porsche went hunting. Under Wiedeking it began accumulating a position in Volkswagen — not by buying shares outright but through options, a structure that kept the true size of the stake invisible to the market. Porsche then announced it had acquired around 75 percent of VW, and short sellers who had bet against the shares discovered there were almost none left to buy back. The squeeze that followed was massive, and for a few days it made Porsche look like the cleverest operator in European finance.

It was a spectacular manoeuvre and it destroyed him. The global financial crisis closed the credit markets exactly when Porsche needed to refinance; the holding company was left carrying debt variously put at €9 to €10 billion, and a €1.75 billion loan request to the German state bank KfW was refused. One analyst's verdict became the epitaph for the whole adventure: Porsche had become "a hedge fund with a car showroom." Porsche rejected a €4 billion merger offer from VW; VW's chairman Ferdinand Piëch reportedly called Wiedeking a loser; Wiedeking accused Piëch of acting against Porsche's interests. He lost. The prey ate the hunter, and Volkswagen absorbed Porsche.

Wiedeking left in July 2009 with a severance package of €50 million — a figure that, arriving at the end of a failed takeover funded by debt, guaranteed him a permanent place in German arguments about executive pay. He was later charged with market manipulation over the VW options campaign. The charges were dropped in July 2016.

Why Wendelin Is Called a Genius

The claim is strongest where it is least glamorous. Wiedeking's real distinction was industrial: he took a near-insolvent specialist manufacturer and re-engineered its production system using methods borrowed from a Japanese mass-market rival, then compounded that operating gain with two product bets — a cheaper convertible and an SUV — that the brand's own devotees thought were desecration. Roughly eighty-fold growth in market value over fourteen years is not a fluke, and the underlying mechanism was not financial engineering but throughput, cost per unit and margin per car. That is an unusually clear-eyed kind of intelligence: the ability to see what your product actually is, commercially, when everyone around you is defending what they think it means.

His peers said so at the time. He was named Manager of the Year in 1994, took the Order of Merit of the Federal Republic of Germany in 2002 and European Manager of the Year in 2008, and sat near the top of Motor Trend's industry Power List, reaching number two in 2009.

The counter-case is severe and unavoidable. The same self-confidence that let him ignore the purists let him convince himself that a small carmaker could take over Europe's largest industrial company with borrowed money and derivatives. He mistook a bull market for a business model, misjudged systemic risk in 2008, and lost the independence of the company he had saved. A €70 million salary and a €50 million exit payment from a firm he left €9 billion in debt is a governance failure whatever the courts eventually decided. Genius as an industrial operator: demonstrated. Genius as a strategist: refuted by the outcome.

Legacy

Wiedeking did not retire quietly. He had taken 30 percent of the shoemaker Heinrich Dinkelacker in 2005, founded the Tialini restaurant chain in 2013, and put money into internet businesses. In 2008 he endowed two charitable foundations with €5 million each, for families and young people in Beckum, where he grew up, and Bietigheim-Bissingen.

The verdict on him depends entirely on where you stop the clock. Stop in 2007 and he is the finest turnaround executive in the modern German car industry. Stop in 2009 and he is the man who gambled Porsche's independence and lost it. Both are true, and the Cayenne — still selling, still funding the sports cars, still annoying purists — is the monument to the half of him that was right.

Achievements

• Cross of the Order of Merit of the Federal Republic of Germany
• Order of Merit of Baden-Württemberg — 2007
• Grand Officer of the Order of Honour for Services to the Republic of Austria
• Global Economy Prize — 2005
• Cicero Orator Prize — 2003
• Educated at RWTH Aachen University