Porsche CEO quits, VW agrees to merger plan

updated 9:45 a.m. ET July 23, 2009

STUTTGART, Germany - Volkswagen AG said Thursday it will pursue an eventual combination with Porsche but vows the sports car maker will not lose its independence.

Wolfsburg-based Volkswagen said its supervisory board, the German equivalent to a U.S. board of directors, plans to hold talks with Porsche SE “in order to reach a final concept fulfilling this goal.”

VW said that the new company will be achieved by the “gradual involvement of Volkswagen in Porsche AG,” Porsche’s carmaking unit, and the subsequent merger of Volkswagen with Porsche SE, the holding company for the automaker.

Earlier, Porsche’s chief executive Wendelin Wiedeking said he is leaving the luxury sports car maker after 16 years at the helm, a move that was widely expected to clear the way for a merger with Volkswagen AG.

The board for Porsche Automobil Holding SE said Thursday that Wiedeking, 56, and chief financial officer Holger Haerter, 53, were leaving with immediate effect from the heavily indebted company that makes the 911 sports car and Cayenne SUV.

The move — along with the announcement that Porsche will seek to raise funds, possibly from a Qatar investor — is expected to make it easier for Volkswagen and Porsche to merge given that Wiedeking, CEO since 1992, opposed such a move.

“The measure shall create the foundation of building an integrated car manufacturing group with Porsche SE and Volkswagen AG,” a company statement said.

Ferdinand Dudenhoeffer, an expert on the automotive industry at the University of Duisberg-Essen, called any merger “a done deal” and said that “Qatar will now get on board in order to master the financial burden.”

Porsche is facing the consequences of a failed takeover bid for much-larger Volkswagen, which led Porsche to incur some 9 billion euros ($13.8 billion) in debt. A merger with VW would raise the possibility of Porsche becoming one of Volkswagen’s brands, which also include Lamborghini and Bentley.

Reaction to the announcement was met with skepticism by investors, who pushed Volkswagen shares down while Porsche shares also fell.

Wiedeking will be replaced by Michael Macht, 48, who currently oversees production, while personnel chief Thomas Edig will serve as Macht’s deputy, the board said.

VW and its chairman Ferdinand Piech have been pushing for a deal that would see it take 49 percent of Porsche and fold the lucrative luxury-car business into its portfolio, widening its range in anticipation of a recovery in the luxury market. Piech also is part of the family that controls Porsche.

Porsche said Wiedeking would receive 50 million euros (nearly $71 million) as he leaves, far below the reports of 140 million euros or even euro250 million that German media had speculated. Wiedeking’s contract was set to expire in 2012.

In a nod to the controversy such an amount is likely to create in Germany, Wiedeking said he would set up a “charitable organization” and seed it with half of his severance pay.

Porsche said Haerter, 53, would receive 12.5 million euros, though both executives might see more compensation through other agreements or bonuses.

“Wiedeking and Haerter came to the conclusion in the last week that the further strategic development of Porsche SE and Porsche AG would be better when they were no longer the responsible people on the board,” the company said.

Wiedeking drew lengthy and thunderous applause before he spoke to about 5,000 Porsche workers.

“We should not look back, no matter what happens,” he said. “We should now work constructively on our future.”

Macht paid tribute to Wiedeking, telling the workers, “Our common job will be to continue the path that was taken by Dr. Wiedeking.”

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