April 10, 1945. American troops advance towards the Elbe. Russian troops prepare their encirclement of Berlin. WW II will last less than a month. On this day, a man packs up 10 million Reichsmark at the Volkswagenwerk GmbH and heads for Austria. This man is Anton Piech, Chief of Operations at Volkswagen, and Ferdinand Porsche’s son-in-law. Ferdinand Porsche had designed the Volkswagen for Hitler. The 10 million Reichsmark were Volkswagen’s war chest. Piech says he will keep the money from the enemy. Keep he did: The money was used to found Porsche KG. Nobody complained.
Anton Piech had a son. Ferdinand Piech. Born 1937 in Vienna. He studies in Zurich, becomes head of R&D at Porsche in Zuffenhausen. In 1972, the Porsche family decides that all members of the clan must withdraw from Porsche’s management. Piech goes to Audi. 1975, he becomes member of the board. 1988 he becomes head of Audi. 1993, Ferdinand Piech succeeds Carl Hahn as head of Volkswagen. This is unprecedented: Piech, who controls nearly half of an – albeit tiny, compared to Volkswagen – car company, at the same time runs one of the world’s largest car companies. Nobody complains.
Piech is now head of the Supervisory Board of Volkswagen. Martin Winterkorn is VeeDub’s CEO. The strings are definitely pulled by Porsche/Piech, each day tighter. Last weekend, tiny Porsche, a midget in the world of cars, increased their holdings of Volkswagen to 42.6 percent. There is no doubt in anybody’s mind, that soon, in a few weeks possibly, the Porsche clan will have the majority at VW.
The money that was taken from Wolfsburg to Austria at the end of the war, is finally coming back. How did Hitler call it? “Destiny.”
As I get it, Porsches recent war chest comes from the humongous profits they made on the Cayenne. Talking engineering costs vs selling price, I’ve heard numbers in the region of a profit in between 30 000-50 000 dollars per vehicle. I don’t know if that’s true or even realistic, but make no doubt that they have large cash on their hands now.
Making 30K to 50K profit on a car that retails between 43K and 94K is absolutely impossible. Common profits per car – if one is ever made – is in the single digits. Porsche is rumored to be highly profitable, but nowhere like the above. Now, keeping in mind that the VW Touareg is the same as the Cayenne, maybe Porsche overcharged VW for the engineering :) Little known: Porsche is the largest car dealer in Europe, the sole importer of all things Volkswagen for Austria, they own tons of real estate, love to own hotels.
The ties between these companies was always very deep. Porsche totally depended on VW for the bulk of their parts to build the early 356. The early engines were slightly modified VW engines. VW designed and built numerous prototypes for VW during the fifties, sixties and seventies. Then we have the 914, 924, and other shared projects.
VW and Porsche were always “family”; now it’s becoming legally so.
Ingvar and Bertel, Since GM and Ford used to consistently make over $10k profit on their large SUV’s (Expedition, Tahoe, etc.), I would guess that Porsche’s profit on the Cayenne easily exceeds $20k, especially on a well optioned one. Many of the options that Porsche charges an arm and leg for have very little incremental production cost. I could imagine that a Cayenne’s profit could touch or exceed $30k in optimal configuration. And that degree of profit margin probably applies fairly well to the other Porsches too. There is a reason why Porsche has the many billions to buy VW.
Bertel, thanks for this very interesting overview of the threads of history. Industrial geneology is generally pretty fascinating (anyone care to summarize the tortured corporate history of the Jeep brand?)
Your follow up post is intriguing. What exactly does Porsche control? Are their holdings in the open?
Good lord knows that Porsche didn’t lose any money employing designers for the past ~30 years; -that’s a big cost-savings right there.
The other very little known chapter in this saga is the $1 million (a small fortune, then) that Studebaker paid Herr Doktor Porsche to engineer an air cooled 120 degree V6 powered, unit body, front engine/rear wheel drive car in the early 1950’s. There were revisions; like water cooled heads (jugs were still air cooled) to simplyfy heating the cabin. The car (typical for German engineering) had all-independent suspension (rear swing axles, of course). Prototypes were built (or at least one was, and shipped to the states. It was brown! Gak.)
This cool million was hilariously thought by the Studebaker executives to be a “fair price” for such outside expertise; in fact, Porsche would have probably done the same job for $100,000 or less. That $1 million literally saved Porsche at it’s lowest ebb.
Needless to say, every time I see a Porsche, my mind thinks “if it weren’t for Studebaker, that car – and company – wouldn’t be there”.
@friedclams: The Porsche Holding GmbH is a private company any not required to disclose its interests
Some links:
http://investing.businessweek.com/businessweek/research/stocks/private/snapshot.asp?privcapId=5870074
http://www.porsche-holding.com/en/history/porsche_holding/new_dimensions/
http://www.faz.net/s/RubD16E1F55D21144C4AE3F9DDF52B6E1D9/Doc~EFE09A9B34BE34042B2B43CFC247A0C98~ATpl~Ecommon~Scontent.html
http://www.abendblatt.de/daten/2005/09/27/486386.html
Porsche Holding is a private GMBH, no requirement to diclose what they own.
A little nit picking… Germany may have surrendered May of 1945, but guns were still ablazin’ on the other side of the globe.
Yeah, never mind the profits from the Cayenne.
The fact that they’ve been flogging the same car and fine tuning it for 45 years and still charging a premium for it is a recipe for huge profit right there.
It’s just like the Jeep Wrangler/TJ/YJ/JK.
Imagine the hundreds of millions of r&d saved by just continually tweaking and updating your designs rather than starting from scratch. With the millions of r&d saved I reckon a brand new Wrangler should be about $4000. Take that, Nano!
WhatTheHel:
Why is “continuous-updating” any worse than starting from scratch every few years?
Personally I don’t get Porsches. Their looks and options pricing just leave me cold. But I’ve always admired their ability to be so darned “continuous,” for lack of a better word.
If the end product from either approach is competitive in the marketplace, and/or if people are willing to pay what Porsche is asking, more power to them. Put another way, if their approach isn’t the way to go, wouldn’t someone have beaten the pants off of them some time in the past few decades?
@Helius: My Japanese wife (we have a little private Axis at home, all that’s missing is an Italian cook) reminded me of same.
helius,
I didn’t say there was anything WRONG with continuous updating. I was merely pointing out that their huge profits didn’t merely roll in on Cayenne sales (which someone had mused earlier). Same point with Wranglers.
If they can get a premium price good for them. I don’t know, maybe more companies should do the same.