As the diesel emissions scandal roiled Volkswagen AG last fall, Wolfgang Porsche -- the elder statesman of the clan that controls the automaker -- did what he does every autumn. He put on his boots, picked up his rifle, and went deer hunting near the half-timbered Austrian farmhouse where he spent his childhood. As he has almost every year for decades, Porsche trekked through the woods above the blue waters of Lake Zell and dined at Schloss Prielau, a 16th-century stone castle he transformed into a luxury hotel.
What Porsche didn't do is take a clear stance as the carmaker his grandfather helped create sank into crisis. In September, Volkswagen acknowledged equipping 11 million diesel vehicles with software designed to trick emissions testers -- revelations that have cost the CEO his job and thrown top management into disarray. The crisis has sent the company's shares down by more than 20 percent, cutting the family's wealth by $2 billion. Last Friday, VW posted the biggest loss in its history and more than doubled the funds set aside to cover the costs of the emissions scandal to 16.2 billion euros ($18.2 billion).
Despite bearing one of most storied names in automotive history, the family -- which controls 52 percent of VW's voting shares via a company called Porsche Automobil Holding SE -- wasn't prepared for a challenge like the diesel crisis. Bound by a tradition of consensus and discretion honed during their privileged upbringing along the German-Austrian border, family members have remained virtually mum. That has left a power vacuum even as VW faces costs that could top $30 billion and become a hit to its reputation that risks eroding sales and profits for years.
Porsche, 72, made almost no public comment on the matter for months, until unions demanded a signal of commitment to the company. On Dec. 2, the VW supervisory board member travelled to the German city of Wolfsburg, where he spoke to 20,000 workers packed into Hall 11 of the giant VW factory. Porsche pledged to preserve jobs and praised management for its handling of the crisis, but said little that directly addressed the cheating.
“No one here is giving in to panic,” Porsche told the overflow crowd. “I am of the rock-solid conviction that Volkswagen can weather the situation and emerge even stronger.”
While the family has the voting power to muscle through change, they're not acting on it. The clan is a sprawling tribe of about 80 people with diverse interests and careers ranging from medicine to film to e-commerce. The ruling patriarchs, now well into their 70s, have been slow to hand the wheel to their children, few of whom have demonstrated an interest in the car business.
“We are not satisfied with the way the scandal is being handled,’’ said Ingo Speich, a fund manager at Union Investment, which owns almost 1 percent of Volkswagen's shares. “The supervisory board is not doing a good job.”
The clan's disengagement dates to 1972. After an internecine struggle over the company's direction that culminated in what family members call a "group therapy session'' at the Zell farmhouse with a professional mediator, they agreed to hand management to outsiders. And while the Porsches have had ties to VW since the 1930s, they only stumbled into control less than a decade ago -- the counterintuitive denouement of a failed bid by Porsche to take over its bigger rival.
With the family AWOL, the void has been filled by VW's powerful unions. Even before the crisis, labor had an unusually strong voice, holding half of the 20 seats on VW's supervisory board and typically finding allies occupying the two seats controlled by the state of Lower Saxony, VW’s second-largest shareholder. Since the crisis, Bernd Osterloh, Volkswagen's burly, combative union boss, has gone on the offensive with a message for the executive suite: This is your mess, and the workers aren't going to foot the bill.
When asked to identify a family leader of the next generation, Wolfgang Porsche singles out his 38-year-old nephew Mark Philipp Porsche. Mark Philipp -- whose resume says he spent 15 years studying business in Innsbruck and who is married to an Austrian television personality -- sits on the boards of VW’s SEAT brand and the MAN truck unit. He declined to comment.