January 20, 2020 • 51 mins
How did Ferdinand Porsche's grandson reshape Volkswagen? And how did a scandal with diesel vehicles nearly break the company?
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Episode Transcript
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Speaker 1 (00:04):
Welcome to tech Stuff, a production of I Heart Radios
How Stuff Works. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland. I'm an executive producer with
I Heart Radio and I love all things tech. And
we are continuing with our story about Volkswagen. And in
(00:24):
our last episode, we made our way up to ninety
two when Dr Carl hand, the former head of Volkswagen
America and the person whom former CEO Heinrich Nordhoff had
handpicked way back in the nineteen sixties to be the
leader of the company, would actually fulfill that vision. In
(00:45):
the interim, Volkswagen had leaders who had pushed the company
beyond its dependence upon the Type one car. Type one
is what we in America called the Volkswagen Beatle. Now,
in fact, Volkswagen's manufacturing facilities in Germany had already stopped
producing the Beatle by early nineteen eighty. The original plan
(01:06):
was to stop in nineteen seventy nine, but as they
were getting towards the end of the year, they realized
that they had way too many orders to fill. They
had to actually keep going, keep producing beyond when they
had planned to stop, in order to meet those demands
and to keep building that reliable little car. By mid
nineteen eighty, that had changed and production had shifted to
(01:29):
Volkswagen's facilities in Brazil and Mexico, so the Beetle was
still being produced there, but was no longer being produced
in Germany. While the company made far fewer of the
Type one vehicles, the facility in Puebla, Mexico churned them
out all the way up until two thousand three. That
means Volkswagen was making the Type one air cooled rear
(01:49):
engine Volkswagen Beetle for nearly sixty years without an eruption.
In Mexico, the car became a popular option for tack
sea drivers because the vehicles were small, they had good traction,
and they were easy to maintain due to their simple
mechanical structure. Eventually, in the Mexican government outlawed the Beatle
(02:13):
as a taxi cab car, deeming it too unsafe for
that purpose. Oh and before I move on, I should
at least mention that Volkswagen began making the Jetta model
of vehicles starting in nineteen seventy nine. The design of
the Jetta aimed at a customer that wanted something a
bit larger than the Volkswagen Golf known as the Rabbit
(02:36):
here in the United States, and the Jetta is one
of the models Volkswagen still produces today and is consistently
one of their more popular models. It also comes in
a lot of different configurations. Two door, four door, five door.
I had to mention it because my producer Tari used
to drive one, though she drove a more recent model
than in nineteen seventy nine Jetta. I imagine she's nodding
(02:58):
yes in case he can't hear her nod. But let's
talk about Volkswagen the company from the time Doctor Han
took over up to present day now. One measure that
Han took was to work with China to establish Volkswagen's
presence in the vast Chinese market. In the early nineteen eighties,
(03:19):
China was just starting to enter into a massive economic transformation,
one that we're still seeing play out today. Volkswagen would
be one of the first Western automotive companies to work
with China. In fact, it was the first Western automotive
company to work with China to create an early automobile
industry in that nation. It would be incredibly important both
(03:41):
to China and to Volkswagen itself. After all, China has
the largest population of any country in the world, and
for several years Volkswagen was the only non Chinese car
company operating within that country, and as you might imagine,
that meant Volkswagen was able to get a big jump
on top of the other car company. Today, Volkswagen and
(04:02):
its partners manufactured vehicles and parts in more than thirty
manufacturing facilities throughout China. Dr Hahn also continued Volkswagen's practice
of acquiring other companies, and acquisitions are going to play
a really big part in today's episode as well. Here later,
but he oversaw the completion of Volkswagen's acquisition of fift
(04:23):
of the Spanish car company Seat in nineteen eight six,
as well as gaining a substantial stake in a check
company called Skota in nineteen These two companies would be
the first non German subsidiaries for Volkswagen. The first subsidiary,
if you remember from the last episode, was Audi that
(04:43):
was another German car company, though Volkswagen would later acquire
more ownership of both car companies, eventually owning both outright,
and Volkswagen would become a leading car company in Europe,
particularly in the southern and Eastern European markets. The subsidiaries
make talking about Volkswagen a little tricky, as there's the
(05:04):
Volkswagen Group that includes all the companies and brands like Audi,
in addition to Volkswagen the car company, which is specifically
the company that makes branded Volkswagen vehicles like the Beatle.
While Volkswagen was growing through these acquisitions, it was also
in some ways following a plan very similar to what
had been the cornerstone for the company during much of
(05:26):
its history. So for decades, the Beatle had been the
primary product from Volkswagen. While Volkswagen was finally retiring the
Beatle in this time, it was essentially doing the same thing.
It was following the same play with a different sensible car,
which would be the Golf. It's not incorrect to say
the Golf was intended for the same type of consumer
(05:49):
who previously would have purchased a Beatle, but Han recognized
that the strategy alone would not be enough to sustain
the company, and in fact, it was depending too heavily
upon any one veha a model is a recipe for
potential disaster if markets should change. With that in mind,
Han gave more freedom to the Audi division. Now, this
really isn't an episode about Aldi, so I don't want
(06:11):
to get too far off track here, but it would
mean that the Audi brand was given a bit more
slack to develop cars for a higher end market than
Volkswagen's Golf catered to. And it would give Audi the
the the freedom to start experimenting more and uh really
(06:31):
branching out from what it had been doing. Breaking free
of a perception that Audi was a brand that made
cars that old people liked. It was able to get
past that an Audi for the most part, operated as
an independent division within Volkswagen. Around this time forward, one
enormous political event that would hit close to home for
(06:52):
doctor Han quite literally was the reunification of Germany. Towards
the end of the nineteen eighties, it became clear that
the Soviet Union days were numbered, and that entire story
is far too big to fit into an episode about Volkswagen.
But one of the many consequences of the Soviet Union's
collapse was that East and West Germany would reunite into
(07:15):
a whole nation. Now, this was when the Berlin Wall,
which once stood as a symbol of oppression and authoritarianism
was pulled down to the ground. For Volkswagen, it would
mean the opportunity to establish new manufacturing facilities and what
had previously been Soviet controlled territory. As for dr Han,
(07:35):
the meaning was much more personal. He had grown up
in Chimnets, which is in eastern Germany. After World War Two,
his family left the region as that region was falling
to Soviet control. In fact, Dr hans father was one
of the founders of Auto Union, which would later evolve
into AUDI. So for Dr Han this was more than
(07:57):
just Volkswagen growing its production facilities. It was coming back
to a part of Germany that hadn't been you know,
approachable for years. It had been behind Soviet control, behind
the Iron Curtain. Part of hans reasoning, in fact, a
large part of it when it came to opening up
manufacturing facilities, was that relying upon a centralized production model
(08:20):
wasn't necessarily efficient or cost effective. He wanted to build
more plants in various regions so that the production facilities
weren't that far away from the people who were actually
buying the cars. That really cut down costs. If you're
building the stuff near where the people who want the
stuff can get the stuff, then you're cutting down costs significantly.
(08:40):
So he was looking ahead to a more unified Europe
and he wanted to build a car company capable of
flourishing in that environment. At the same time, expanding operations
costs a lot of money, and Volkswagen was spending a
ton to build out these manufacturing facilities. Moreover, Han felt
that the European market would serve as sort of the
(09:00):
foundation for the rest of Volkswagen's businesses around the world,
so most of his focus was on developing the European
market and investing in that market, which meant Volkswagen's presence
in other parts of the world, notably in North America
and the United States, really began to fade quite a bit.
Fans of Volkswagen in the US felt like they were
(09:21):
being neglected, something that stung more than a little bit
considering the fact that Dr Han had once been the
head of the American division of Volkswagen. The popularity of
Volkswagen in America had been on shaky ground since nine
when sales figures dipped from year to year. It went
down from nineteen one. Now the numbers fluctuated a bit
(09:43):
over the next several years. Sometimes they would go down
quite a bit, sometimes they would rebound a little bit.
But the general trend from nineteen eighty one all the
way to nineteen nine three was to see declines in sales.
And I'm sure most of you know that's the opposite
of what you want to see in a sales chart.
And when I say a decline, I mean there was
a really big drop off. So back in nineteen eighty
(10:06):
Volkswagen sold around three hundred thirty eight thousand vehicles in
the US market. In that number dropped down to fewer
than fifty thousand vehicles. So three d thirty eight thousand
down to less than fifty thousand. That's catastrophic. So what
caused that number to drop down so low in the
(10:27):
United States? Well, one reason was that the general consensus
was that the cars coming out of the American manufacturing
plant were substandard, and another was that the cars coming
out of Mexico were similarly unreliable, and the Puebla manufacturing
facility in Mexico was experiencing a ton of different problems.
(10:48):
So it wasn't until nineteen when Volkswagen introduced the third
generation of the Goulf and the third generation of the
Jetta models in the US that sales began to recover.
The American market was fiercely competitive at that time. Japanese
automakers were really filling in the void that had been
left by Volkswagen, and the Japanese companies were offering cars
(11:10):
that aimed at customers who were looking for reliable, inexpensive vehicles.
So in the nineteen seventies, if you were talking about
an auto import in the United States, you were probably
talking about Volkswagen. But by the mid eighties that had changed.
If you were talking about an import, you were probably
talking about Japanese car. And Dr Han didn't seem too
(11:31):
concerned about reversing that trend, as he was focused more
on the European market at the time. Now that's not
to say Volkswagen wasn't introducing new vehicles during Dr hans
time as CEO. The company produced new models like the
Volkswagen Santana also known as the Quantum, which evolved from
the Volkswagen Pasat. Volkswagen also made a few cars for
(11:53):
various regional markets like Brazil or Eastern Europe, and these
were very much peculiar to those agents. So if you
weren't from there, you were not likely to see one
of these types of Volkswagen's. In Volkswagen launched an ad
campaign in the United States that I still remember quite well.
The company introduced a new word to Planet Earth. That
(12:16):
new word was far fig nugan. This was technically a
brand new word made up of two existing German words.
You had fatherin, meaning to drive, and very NuGen, which
means enjoyment. So this was supposed to be about the
enjoyment of driving driving enjoyment varvig NuGen. This was not
(12:37):
an existing German word, rather one that was invented for
the ad campaign. However, I will say that the German
language frequently strings together multiple words to create a new word,
rather than just inventing a sensible short word to handle things.
That's why you will occasionally run into German words that
are incredibly long, because they've just strung together a bunch
(12:58):
of pre existing words to describe something new. Now, despite
the ad campaign, the general feeling in the US was
that Volkswagen was just focused on other markets and not
in North America. In Dr Han retired as CEO, and remember,
the worst year for North American sales would follow in
(13:20):
partly because Dr Hans strategy hadn't really supported the North
American market. The new head of the company would be
a man named Ferdinand Psh. And by the way, I know,
I butchered the pronunciation of Psh in a previous episode
when I talked about this family. But Ferdinand Psh had
previously helmed the Audi division under Volkswagen Group, and beyond that,
(13:43):
he traced his lineage back to the very founding of Volkswagen.
His grandfather was Ferdinand Porsche himself. His father was Anton Psh,
who married Ferdinand Porsche's daughter Louise headvig Annie Villehelmina Portschah.
What a name. And so if you listen to my
(14:05):
first episode in this series, you know that Anton Psh
had been the director of Volkswagen during World War Two.
That meant he was overseeing operations back when Volkswagen was
dependent upon forced labor, and reportedly he ran off with
a significant amount of money from Volkswagen while fleeing Allied forces.
(14:25):
In he would get arrested by French authorities along with
Ferdinand Porsche and spent a couple of years in jail
before finally being released. Well, Ferdinand pH had previously worked
at Porsche mainly in efforts to build high performance racing cars,
with the primary goal of building a vehicle that could
win the Laman's endurance race. This type of race is
(14:48):
different from those that are all about the first vehicle
to cross the finish line after a given number of
laps or distance. Instead, the winning vehicle at Lament's is
the one that has covered the most distance in a
twenty four hour period, So whichever car has gone the
furthest within twenty four hours across a predetermined route. Porsche
(15:11):
had been entering versions of its Porsche nine seventeen for
twenty five years before a Porsche driver took home the
top prize. Ferdinand had achieved his goal of engineering a
winning race car at great expense. In fact, it was
such an expensive endeavor that it nearly bankrupted Porsche. In
(15:32):
nineteen two, Ferdinand Psh would transition from Porsche to go
work at Audi. Now this wasn't necessarily by choice. Pasha's
obsession with creating faster racing cars had almost brought down
the company, and ownership of the company fell to two families,
the Porsche family and the pH family, and both of
(15:54):
those families trace their history back to the founder Ferdinand Porsche.
Both of them owned about fifty of the company Porsche,
and the two sides were beginning to fight with each other,
and I swear going through the stories makes it seem
like it's a season of Game of Thrones. We'll learn
more about that later in this episode. So in order
(16:15):
to prevent this rivalry from tearing the company to pieces,
the two families agreed that no one from either side
should be involved in the day to day operations of Porsche.
So that's why PSH would leave Porsche the car company Porsche,
not the holding company for Audi. Ferdinand. PSH would Transformality
(16:37):
from that brand that was being viewed as a bit
old fashioned in catering to the elderly into more of
a luxury sedan brand, and so it brought Audi into
competition against vehicle makers like BMW or Mercedes. But PSH
had grander designs. He wanted to head up Volkswagen itself.
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(18:47):
All right, let's get back to the episode. Now. We're
getting into an era in Volkswagen's history that was particularly
complicated by family politics. This stuff gets juice. There's betrayal,
there's shifty maneuvering, there's backstabbing, their extramarital affairs. I mean,
if you look at the Porstcha and PSH families from
(19:09):
the nineteen seventies to the two thousands and a little
bit beyond, it sounds like the stuff out of a
soap opera, like Dynasty or Dallas. It's crazy. On top
of that, we enter into a bizarre corporate structure in
which different companies gain a stake in each other, and
in some cases it looks to me like the whole
thing is oura borus. You know, the snake eating its
(19:32):
own tail. And I'll do my best a little bit
later in this episode to try and work out how
that actually ends up being structured. For no other reason
that to illustrate how the ownership of these companies is
incredibly complicated and at least to me somewhat ikey. In
the meantime, we've got other stuff to touch on now.
While I'll have lots of critical things to say about
(19:54):
pH one thing that's clear is that his ambition pushed
Volkswagen to new heights. He was reportedly a very hard
boss to work for, Like he was incredibly demanding and ruthless. Uh.
He was quick to throw you aside if he didn't
think you were useful. And there are a lot of
(20:16):
other negative things I could say. But in nine the
company would introduce the new Beatle and that would become
available for purchase in the United States the following year,
and that showed that they were now paying attention to
the North American market again and no longer keeping such
a laser focus just on Europe. This was a combat
car that was inspired by the original Beetle, but it
(20:38):
featured sleeker lines, front mounted inline four cylinder engine. If
you listen to the first part of the series you
remember that the original Volkswagen Beetle was an air cooled
rear mounted engine, so it was very different from that,
and Motor Trends would actually name it the import car
of the Year in nineteen Despite its small size, it
(21:00):
really wasn't the most efficient vehicle on the road. It
averaged twenty one miles per gallon. You would have thought
that perhaps it would have been a little better about that,
but no. Well, the new Beatle, along with an updated
Passat and a new Jetta model all helped revitalized Volkswagen
sales in North America after that market had been largely
(21:21):
forgotten about for more than a decade. Meanwhile, on the
corporate side of things, pH was leading some pretty serious
efforts to really expand Volkswagen's assets. One of the big
acquisitions at this time was Bentley Motors, the company that
had gone through a couple of changes in ownership, having
been part of Rolls Royce for nearly forty years before
(21:42):
a company called Vickers Plc purchased the Rolls Royce Motor
division in nineteen seventy. Twenty eight years after that, PSH
and Volkswagen came calling with an offer to purchase the
Bentley brand. Though Volkswagen would not acquire ownership of the
Rolls Royce logo or name, they did get hold of
the designs. They could use the car designs, but they
(22:04):
could not use the logo or name of Rolls Royce Bentley's.
In case you don't know, our luxury cars like as
luxury as luxury gets really crafts. People hand make many
of the details on the vehicles like you'll get like
hand carved dashboards, for example. So the manufacturing process is
(22:26):
guided by a human touch nearly every step of the way.
It is slow and methodical, and these are extremely expensive
luxury cars. They're also extremely British. The cost of the
acquisition was four hundred thirty million pounds. But we're not
done with Volkswagen's purchases in n yet. The company also
(22:48):
acquired the rights to use the Bugatti brand name. Now,
Bugatti has its own odd past. In fact, at this
point I think it must come as a prerequisite for
car companies. It was founded in the early twentieth century
by a Torre Bugatti, who built many successful race cars
in the early nineteen hundreds, but after his death in
(23:09):
the nineteen forties, the company kind of lost focus, and
by the nineteen fifties it had pretty much faded from memory.
It wasn't really producing cars anymore. In nineteen seven, Romano
are totally an entrepreneur, acquired the rights to the Bugatti
brand and built new manufacturing facilities with the the intent
of making Bugatti a prestige brand again. The new Bugatti
(23:32):
company produced several cars, but a recession in the nineteen
nineties took a big chunk of the company's assets and
it was essentially a failed business by so three years
later in nine Volkswagen acquires the brand name Bugatti and
starts up production with new model designs. So today the
Bugatti brand is associated with super cars that come with
(23:56):
incredible high end price tags. And I think it's most
a testament to Pasha's interest in fast cars, Like he
clearly always had a fascination with building incredibly fast vehicles,
and Bugatti are the type of cars that look like
they're going fast even when they're sitting still. And I'm
still not done with their acquisitions. One other big brand
(24:19):
that Volkswagen acquired that year was Lamborghini. That was the
Italian luxury sports car company. It's now part of Volkswagen
It was founded in the nineteen sixties. Largely it was
intended to be a competitor to Ferrari and developing high
performance race cars. As I mentioned earlier, is really expensive.
I mean it nearly bankrupted Porscha. Well for Lamborghini, that
(24:43):
they were having the same sort of issues. They were
spending way more money than they were making, and then that,
paired with the oil crisis of the nineteen seventies, meant
that very few orders for these high end sports cars
were coming in. It led to a disastrous collapse of
the Lamborghini company and the company went bankrupt and eighteen
seventy eight. A few years later, brothers Patrick and Jean
(25:04):
Claude Memroun revived Lamborghini and it became a brand uh
a new in the nineteen eighties, um with with models
like the Kuntash, which I remember as a kid, I
thought was the most amazing looking car I've ever seen.
But then they ended up selling Lamborghini to the Chrysler Corporation.
In Chrysler would in turn sell Lamborghini off to a
(25:26):
Malaysian company, and it was from that company the Volkswagen
would acquire the rights to the Lamborghini name. And designs. Now,
technically Lamborghini falls under the AUDI division at Volkswagen, and
as I mentioned before, AUDI gets to operate more or
less independently from Volkswagen, but it belongs to Volkswagen Groups.
So Lamborghini is one of the brands under the Volkswagen
(25:47):
Group name. All right, let's skip ahead to two thousand two.
Volkswagen announced two new lines of vehicles that year. There
was the Phaeton line that was a luxury car brand,
and there was the Tourig line, which are SUVs. Now.
This was also the year that ferinand Psh would step
out of the role of CEO for Volkswagen and he
(26:08):
became the chairman of the board for Volkswagen Group for
their supervisory and steering committees. pH would continue to have
significant influence within the company. His successor as CEO was
an engineer named Burned Peter Pischets Reader and I'm sure
of butchered that last name, so we're just gonna call
him Burnt because it's a lot easier. In two thousand three,
(26:32):
the final Type one Beatle, the original Volkswagen vehicle model
that carried the company for decades, rolled off the manufacturing
facility in Pueblo, Mexico, and it was actually given a number.
It was number. It was car number twenty one million,
five thousand, four hundred sixty four. It was not sold
(26:54):
off to some lucky motorist. Instead, it was actually shipped
back to Volkswagen's headquarters in Volksburg, Germany, because, as Indiana
Jones would say, it belongs in a museum. Burnt would
only stay at CEO for just a few short years
before he was essentially forced to resign, and allegedly the
(27:17):
reason that he was forced to resign was because he
was frequently coming to disagreements with pH, who really wanted
to keep control of this company. Martin Winterkorn, who had
been the leader for the AUDI division, would then step
in to take over the role as CEO. That would
happen in January two seven, and winter Corn had been
(27:39):
a pH protege though that would be put to the
test in a big, big way. So at first pH thought,
oh yeah, now I've got my guy in this space,
even though the pH had handpicked Burnt earlier. So um,
the fact that he kept getting burned by people that
he picked might say more about his management style, I guess.
(28:00):
In two thousand and eight, Volkswagen announced plans to build
an assembly plant in Chattanooga, Tennessee, a billion dollar assembly plant.
It would be finished by two thousand eleven. And this
was the goal of producing cars for the American market,
you know, within the market itself again, to augment Volkswagen's
production facilities and reduce the cost of getting cars to Americans.
(28:24):
That was also the year when we would see a
game of thrones like struggle really heat up. So let
me see if I can sort all of this out.
This is also gonna mean sticking with this particular story
and skipping some other stuff in the timeline for now,
but I want to try and work my way through
this whole sordid affair, alright. So this is really the
story of two companies, Volkswagen Group and Porsche se which
(28:48):
is a holding company. And it's also the story of
two families, the Porsche family and the related pH family,
their cousins to each other, and both of these trace
their lineage to Ferdinand Porsche, the founder of both Porsche
the auto company and Volkswagen the auto company. And it's
also about a lot of complex corporate maneuvers that frankly,
(29:10):
I don't fully understand, because tech is easy, but corporate
structures are really hard. Okay, So the Porsche pH families
own a holding company called Porsche s E. And now, typically,
a holding company's purpose is to create a central point
of control for multiple distinct businesses while simultaneously isolating those
(29:33):
businesses enough so that if one should fail or falter,
it doesn't drag the others down with it. So it's
a way to limit liability in other words, And each
business under a holding company performs as its own distinct business,
though it ultimately is under the umbrella of the parent
holding company. The holding company holds assets and equity, but
(29:54):
doesn't get involved in the day to day operations of
the business it holds, so you can think of it
as the business owners but not the business operators. At
least that's how it usually goes. So let's lay out
the arrangement here. So Anton Psh and Ferdinand Porsche first
founded the company that would evolve into portscha Se way
(30:15):
back in the nineteen thirties, and this is that holding
company that oversees assets. Essentially, this company holds the assets
of the Porsche and Psh families. It it funnels all
of the shares that all the different members of these
families have and represents their ownership of Porsche um. Different
(30:36):
members of the family, oh own different numbers of shares,
so like one person in Porsche family might own twice
as many shares as most of the other members of
the families. So just imagine a really big family of
people who don't really get along all that well with
one another, and they all own some part of this
(30:59):
holding company. Okay, so Porsche SE in turn owns the
family interest in another holding company called Porsche Vision Holding.
I oh, you Germans Vision Holding essentially means intermediate holding company,
(31:20):
which I mean that tracks right like it's a holding
company that's owned by a different holding company. Now, to
be fair, it's a little more complicated than even that.
This is starting to turn into like a Russian nesting
doll situation here. But the Porsche pH families own fifty
point one percent of this intermediary holding company. So you
(31:41):
can think of Porsche SE as the organization that holds
the assets that in turn represent controlling interest in another
holding company. But it's this intermediary holding company that owns
one hundred percent of Porsche Automobile Group that that's the
actual car manufacturing company that's responsible for building and selling
(32:04):
Porsche vehicles. So you know, Porsche se which represents the
family Porsche pH interest in Porsche's Vision Holding and that
in turn owns Porsche Automobile Group, got it because I
don't now Porsche had as in the car company had
(32:25):
a long history of being involved with Volkswagen's operations since
the very beginning, and the holding company had a five
percent stake in Volkswagen up until two thousand five, So
the Porsche Holding Company also owned some ownership in Volkswagen,
a small amount five percent, But in two thousand five
Porsche acquired more shares in Volkswagen and increased the ownership
(32:49):
to twenty percent. So now the Porsche Holding Company owns
one fifth of Volkswagen. For a while, it looked like
that was all that they could do, because is the
German government had actually passed a law specifically for Volkswagen
that prevented any single shareholder from acquiring more than of
(33:10):
the ownership of the company. And this was in large
part because Lower Saxony, the government region of Lower Saxony,
was an owner of Volkswagen. If you listen to my
first episode you remember I mentioned that that the trade
unions still to this day have a powerful voice within
the operations of Volkswagen, and technically Lower Saxony had a
(33:34):
little more than ownership of Volkswagen. So by passing this law,
Germany was preventing anyone else from getting more power in
the company than Lower Saxony had, So this government group
would have the most powerful say in the company as
(33:54):
long as everyone else was limited to ownership or less.
But then the European Union come challenged this law in
two thousand seven and things started to change, and perhaps
emboldened by that challenge, the Porsche Holding Company increased its
steak in Volkswagen to nearly of the shares, so now
it owned more of Volkswagen than Lower Saxony did. Little
(34:18):
by little Porsche would add more shares of Volkswagen to
its steak, and the process was incredibly expensive. So by
two thousand nine, when Porsche held more than fifty percent
ownership so it had controlling interest in Volkswagen, it became
clear that it was not going to be sustainable. Porsche
of the company was in debt up to its corporate eyeballs.
(34:39):
So then in a move that I still find perplexing.
Volkswagen goes and acquires forty nine point nine percent ownership
in Porsche Automobile Group as in the actual automobile company.
All right, now, follow me here. Porsche the holding company
takes majority ownership of Volkswagen Group. Volks Wagon Group has
(35:01):
nearly fifty percent ownership of the Porsche Car Company. Say
I told you this was confusing. Now, at this point,
the Volkswagen and Porsche companies were in talks of actually
merging together, but that didn't happen as the EU Commission
seemed ready to oppose the move and there were some
legal risks, but that would all get settled by two
(35:22):
thousand twelve because then Volkswagen would go ahead and purchase
the remaining interest in the Porsche Automotive Company, not the
holding company, but the actual car company. In addition, managers
in Volkswagen were to become managers in Porsche s C,
which would ensure that Volkswagen would remain the dominant party
at the table. Now, another part of the reason why
(35:43):
this all gets so messy is that the families involved
were feuding. On the Porsche side, you had Wolfgang Porsche,
who was widely regarded as the head of that family,
so you can think of Wolfgang as the godfather of
the Porsche's. On the pH side, you had Ferdinand pH,
the former Volkswagen CEO and then the chairman of Volkswagen's
(36:04):
Supervisory Board. The two were trying to outmaneuver each other
throughout this entire process, and pH had clear contempt for
his cousin. There are lots of stories about pH insulting
the Porsche side of the family, with one report claiming
that pH likened the Porsche's two pigs and then likened
(36:24):
himself to a bore. And what he was saying, well,
he was alluding to the fact that he Psh had
grown up going to a tough boarding school, and he
had put in the work to grow Volkswagen over the years.
He was an engineer, he actually did the work, whereas
the Porsche side, all of them went to fancy prep schools,
(36:45):
they had no interest in engineering, and most of them
were lawyers, so it was clear he didn't have a
very high opinion. This would continue to boil over over
the following years. I'll explain more in just a moment,
but first let's take another quick break. Okay, So that
(37:07):
whole corporate mess. I just covered kind of boils down
to Volfgang Porsche and Ferdinand pH facing off against each other,
with pH ultimately winning at least a little bit. And
if it weren't for that darn diesel Gate scandal, this
would likely be the most crazy part of the Volkswagen story.
But then we do have the diesel Gate scandals. Let's
(37:29):
talk about what that was and what it means. So
back in the mid two thousand's, Volkswagen began to make
a serious marketing push, designing diesel based vehicles for the
United States and other markets and instead of gasoline powered vehicles.
So diesel engines were invented by a guy named Diesel,
and he built a combustion engine that he intended to
(37:51):
run off of stuff like peanut oil. And in fact,
you can run diesel engines off of some plant based oils.
Sometimes you want to do a little bit of processing
before you do that, but you can do it. Diesel
engines can't run at a much higher efficiency than gasoline engines,
so you can run a diesel engine for longer with
a comparable amount of fuel than a gasoline engine. Now
(38:13):
I could do a full episode to lay out the
differences between diesel and gasoline engines, but really for the consumer,
a big differentiating factor is just how far you can
travel per given amount of fuel. Diesel cars get more
miles to the gallon than gasoline based cars, and there
are a lot of other factors that determine whether or
not it makes financial sense to go with diesel over gasoline.
(38:35):
That includes the cost of the fuel, because if diesel
is significantly more expensive the gasoline, you have to factor
that in as well as the purchase price of the vehicle.
Of diesel vehicles are more expensive than you may not
see a financial benefit to going with diesel as opposed
to gasoline, but that's neither here nor there for the scandal. Now,
one of the things car companies must do is they
(38:55):
have to meet emissions standards with their vehicles in order
to be able to do business within certain countries like
the United States. And this is all related to environmental impact.
So your cars have to perform at a certain standard,
you know, beneath a threshold, or the United States government
doesn't allow you to sell those cars in the US market.
(39:16):
So back in the mid two thousand's, some engineers at
Volkswagen we're trying to figure out how to make a
diesel engine that would operate within the restrictions on emissions
that the United States government had established. But they also
were working with very tight restrictions within Volkswagen itself. So
the culture within Volkswagen was success at any cost. I mean,
(39:38):
pH had had proven that he was willing to spend
tons of money to succeed at various engineering tasks, but
at the same time, the restrictions were so tight on
this department, they didn't have very many options. So they
realized that rather than actually changing the engine, which was
going to be very expensive and beyond the budget they
were given and beyond their capabilities, they could instead make
(40:00):
a few tweaks to some software algorithms to make the
engines operate at or below emissions thresholds, and that would
allow them to stay within budget for the development of
the cars. There's only one problem. The tweaks meant that
Volkswagen was going to essentially be cheating on emissions tests. Now,
this didn't get discovered right away. It wasn't until two
(40:22):
thousand fourteen when some West Virginia University researchers found that
two cars that they were testing a Volkswagen Jetta and
a Volkswagen Pasat emitted much higher emissions levels than what
they should be doing based upon emissions testing. Now. Volkswagen's
official response initially anyway, was that there must have been
(40:44):
some sort of unexpected technical issue and unusual test conditions
that led to this. Engineers at Volkswagen sent a memo
to CEO Martin winter Corn at the time or vinter Corn,
but it's not known if vinter Corn actually saw that
particular memo because it was bundled with a whole bunch
of other memos at the time. Um there are a
lot of people who suggest that perhaps he knew about
(41:04):
this early on, and others who say that maybe he didn't. Well,
Volkswagen would issue a recall on diesel vehicles. They recalled
all of them. I guess it's recall, not a recall
behind the current guys. I've had two hours sleep, So anyway,
the California Air Resources Board or CARB would then find
(41:25):
some irregularities on supposedly fixed vehicles in two thousand fifteen.
These are vehicles that Volkswagen had supposedly recalled and then
fixed and then put back into the market. But the
CARB was finding that there were still these irregularities. Then
the engineers at CARB we're finding that Volkswagen's explanations for
(41:48):
why those irregularities were happening didn't seem to actually match
up what they were seeing. Then the Environmental Protection Agency
goes and tells Volkswagen, Hey, you know, we're not gonna
let you sell any of your twenty six d SILD
vehicles in the United States. And it was at that
point the Volkswagen said, oh, um, are bad. Actually, we
just found out there's some software regularities, and then they
(42:08):
explained what was going on, and that leads us to
the actual scandal. So essentially, when the vehicle's computer detected
that it was going into emissions testing, that someone was
connecting their testing equipment to the vehicle's computer, it would
then engage systems that would limit emissions. They would also
(42:29):
decrease engine performance. Now, if the cars just operated in
that mode all the time, we wouldn't be talking about
a scandal. But Volkswagen probably wouldn't have seen as many
sales because drivers would be disappointed. They would feel like
the cars were not performing very well, they were underpowered,
their performance just wouldn't meet expectations. So in order to
(42:51):
meet expectations, they needed to have the engines have a
higher output of power. But if they did the higher
outpuput of power, you have higher emissions. So if a
Volkswagen diesel cars computer detected that it was connected to
emissions testing, it would initiate this dampening system and you
(43:12):
would have lower emissions and lower output. But then once
it was detected that it was no longer connected to
an emissions testing machine, it would disengage those dampening systems
and the car's performance would improve significantly, but it would
also emit way more pollution, including stuff like nitrogen oxide,
(43:33):
and it would be well beyond what was the emissions threshold.
So in other words, the cars were cheating on tests.
When the teacher was looking, and in this case the
teacher is someone performing an emissions test, then the vehicle
would pull its punches and purposefully underperform, emitting fewer gases,
and then once the teacher was looking somewhere else, it
(43:55):
was party time. Well. The e p A was not
amused and concluded the Volkswagen had purposefully tried to circumvent
the Clean Air Act in the United States, and further
that the Department of Justice would have the authority to
impose a total of thirty seven thousand, five hundred dollars
of civil finds per vehicle that used this kind of
(44:16):
work around, like as in each individual vehicle. The defeat
devices were in vehicles spanning model years from two thousand
nine to two thousand sixteen, so if you added them
all up, it would mean that Volkswagen could potentially face
a maximum up to eighteen billion dollars in fines alone.
(44:37):
Volkswagen then admitted that the same defeat system was in
place in eleven million diesel cars around the world, and
that Volkswagen had already set aside several billion dollars worth
to fix these affected cars. Then came criminal proceedings against
engineers and executives at Volkswagen, both in the United States
and in Germany, as well as a scramble to figure
(44:59):
out how to buy back vehicles that didn't meet the
emission standards. So in total it would cost Volkswagen around
thirty billion dollars. That is a princely sum and an
enormously expensive mistake. And mistake in judgment, I should say,
it's not like they accidentally did this. They the engineers
(45:21):
that did this did this knowingly, and the costs went
beyond the monetary Martin went vinder Korn, who was CEO
when the scandal first broke, would end up accepting responsibility,
but he also denied that he had had any personal
wrongdoing involved in this. He said that he had no
direct hand knowledge and he had no uh direct involvement
(45:43):
in the decision to try and circumvent clean air laws.
But he also said that as CEO, he has to
be held responsible for this sort of thing happening under
his watch. So he resigned his position and he was
replaced by Matthias Mueller, who pledged to cooperate with investigators
to get to the bottom of who was responsible, while
also making amends to customers who were directly affected by
(46:06):
the scheme. Now, Mueller was previously the CEO of Porsche,
which also would end up getting pulled into this diesel
Gate scandal. It wasn't just Volkswagen vehicles. There are also
some Porsche vehicles and Aldi vehicles that would be involved
in this. So he would serve as Volkswagen CEO only
until two thousand eighteen, and that was when the Board
(46:26):
of Directors kicked him out, largely because the company as
a whole had been perceived as moving too slowly to
address the problems that arose due to Diesel Gate. So
his replacement was Herbert die who was formerly the brand
chief over at Volkswagen. So this is becoming like a
revolving door situation with these quick turnarounds and CEOs. Ferdinand
(46:48):
Psh resigned from the supervisory board of Volkswagen in April
two fifteen. This would be before Martin Vinterkorn was had
to resign. Then pH would sell off his shares in
Volkswagen in May of two thousand fifteen, essentially divorcing himself
from the company entirely. This predated Martin Vintercorne's resignation as well,
(47:11):
So in fact Psh was attempting to have Vindercorn actually
removed as CEO, and this is what led to pH
to saying he was going to step away from the company.
He voted to have Vindercorn removed, but he was the
only member of the steering committee to do so. Uh,
the others all voted against him, and Wolfgang Porsche, his rival,
his cousin, was one of the parties who was, you know,
(47:34):
essentially campaigning against pH. So pH left the company, sold
off his interest, and then he threw a whole bunch
of executives under the bus as he left. He implied
that a lot of people in senior levels of management,
including all the way up to the executive level, knew
about and had approved of, the illegal technology that allowed
(47:56):
Volkswagen's diesel engines to cheat on emissions tests. Now, whether
his allegations were true or not was uncertain, But he
dumped a ton of fuel on the fire, and I
guess it must have been gasoline fuel, because diesel doesn't
burn like gasolene does. Don't try that at home. Pish
would end up passing away at age eighty two in
two thousand nineteen. He left behind twelve or maybe thirteen children.
(48:22):
The numbers aren't entirely clear. There are a lot. There's
a lot of actual disagreement. Um, he was married twice
and he had a couple of kids outside of marriage.
In fact, one a couple of them were with the
estranged wife of his cousin, So he had an affair
with his cousin's wife. Told you this was like game
of Thrones, man, I was not kidding. So Volkswagen is
(48:46):
still managing the consequences of diesel Gate. To this day,
CEO Herbert Diese is at the center of some criminal
charges that state he and other Volkswagen executives were waiting
too long to inform investors of the extent and nature
of the diesel Gate scandal, and that as such they
were essentially committing fraud. They were telling investors that the
(49:06):
company was in much better shape than it actually was. Meanwhile,
Volkswagen is trying to move beyond this disaster. It has
announced a plan that by t we're gonna see the
company producing one and a half million electric cars, and
that number actually keeps climbing, so it might be higher
by the time you hear this episode in Volkswagen also
produced the final Edition Volkswagen Beetle, which was an updated
(49:30):
version of the new Beatle, and that that last one,
the very last final edition Volkswagen Beetle, rolled off the
production line in July two th nineteen. So now the
Volkswagen Beetle is retired again. But who knows, maybe the
company is going to bring it back out of retirement
one more time in an effort to climb out of
(49:52):
this massive mess. It finds itself in and that's where
Volkswagen is today. As I said, I found this story
to be fascinating, not just from a technological standpoint, but
just from the political, social, corporate side. It's so complicated,
and it's it's so so closely tied with family feuding.
(50:13):
I had no idea about Volkswagen's involvement with the Porsche family,
um largely because it's a European company, and my my
vision of Volkswagen has always been the Volkswagen Beetle. That's
if you say the word Volkswagen to me, I think
of the old VW Beetle and this sort of quirky,
(50:33):
iconic vehicle that's associated with like the hippies and the
the Summer of Love and that kind of stuff, and
and Disney movies. I don't think of a company that
was founded, you know, and well or at least funded
by Nazis and then run by various people who were
(50:53):
having crazy feuds with each other in power struggles like
None of that ever occurred to me, And I definitely
didn't know that Volkswagen had purchased brands like Lamborghini and Bugatti,
probably because those cars are just a hair outside of
my price range. By a few hundred thousand dollars, but
(51:14):
it was an interesting thing to look into. If you
guys have any suggestions for future topics of tech stuff,
whether it's a company, a technology, maybe it's a trend
in tech you would like me to talk about, let
me know. Send me a message on Facebook or Twitter.
The handle we use at both of those is tech
Stuff HSW and I'll talk to you again really soon.
(51:40):
Tex Stuff is a production of I Heart Radio's How
Stuff Works. For more podcasts from my heart Radio, visit
the i heart Radio app, Apple Podcasts, or wherever you
listen to your favorite shows.
Welcome to tech Stuff, a production of I Heart Radios
How Stuff Works. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland. I'm an executive producer with
I Heart Radio and I love all things tech. And
we are continuing with our story about Volkswagen. And in
(00:24):
our last episode, we made our way up to ninety
two when Dr Carl hand, the former head of Volkswagen
America and the person whom former CEO Heinrich Nordhoff had
handpicked way back in the nineteen sixties to be the
leader of the company, would actually fulfill that vision. In
(00:45):
the interim, Volkswagen had leaders who had pushed the company
beyond its dependence upon the Type one car. Type one
is what we in America called the Volkswagen Beatle. Now,
in fact, Volkswagen's manufacturing facilities in Germany had already stopped
producing the Beatle by early nineteen eighty. The original plan
(01:06):
was to stop in nineteen seventy nine, but as they
were getting towards the end of the year, they realized
that they had way too many orders to fill. They
had to actually keep going, keep producing beyond when they
had planned to stop, in order to meet those demands
and to keep building that reliable little car. By mid
nineteen eighty, that had changed and production had shifted to
(01:29):
Volkswagen's facilities in Brazil and Mexico, so the Beetle was
still being produced there, but was no longer being produced
in Germany. While the company made far fewer of the
Type one vehicles, the facility in Puebla, Mexico churned them
out all the way up until two thousand three. That
means Volkswagen was making the Type one air cooled rear
(01:49):
engine Volkswagen Beetle for nearly sixty years without an eruption.
In Mexico, the car became a popular option for tack
sea drivers because the vehicles were small, they had good traction,
and they were easy to maintain due to their simple
mechanical structure. Eventually, in the Mexican government outlawed the Beatle
(02:13):
as a taxi cab car, deeming it too unsafe for
that purpose. Oh and before I move on, I should
at least mention that Volkswagen began making the Jetta model
of vehicles starting in nineteen seventy nine. The design of
the Jetta aimed at a customer that wanted something a
bit larger than the Volkswagen Golf known as the Rabbit
(02:36):
here in the United States, and the Jetta is one
of the models Volkswagen still produces today and is consistently
one of their more popular models. It also comes in
a lot of different configurations. Two door, four door, five door.
I had to mention it because my producer Tari used
to drive one, though she drove a more recent model
than in nineteen seventy nine Jetta. I imagine she's nodding
(02:58):
yes in case he can't hear her nod. But let's
talk about Volkswagen the company from the time Doctor Han
took over up to present day now. One measure that
Han took was to work with China to establish Volkswagen's
presence in the vast Chinese market. In the early nineteen eighties,
(03:19):
China was just starting to enter into a massive economic transformation,
one that we're still seeing play out today. Volkswagen would
be one of the first Western automotive companies to work
with China. In fact, it was the first Western automotive
company to work with China to create an early automobile
industry in that nation. It would be incredibly important both
(03:41):
to China and to Volkswagen itself. After all, China has
the largest population of any country in the world, and
for several years Volkswagen was the only non Chinese car
company operating within that country, and as you might imagine,
that meant Volkswagen was able to get a big jump
on top of the other car company. Today, Volkswagen and
(04:02):
its partners manufactured vehicles and parts in more than thirty
manufacturing facilities throughout China. Dr Hahn also continued Volkswagen's practice
of acquiring other companies, and acquisitions are going to play
a really big part in today's episode as well. Here later,
but he oversaw the completion of Volkswagen's acquisition of fift
(04:23):
of the Spanish car company Seat in nineteen eight six,
as well as gaining a substantial stake in a check
company called Skota in nineteen These two companies would be
the first non German subsidiaries for Volkswagen. The first subsidiary,
if you remember from the last episode, was Audi that
(04:43):
was another German car company, though Volkswagen would later acquire
more ownership of both car companies, eventually owning both outright,
and Volkswagen would become a leading car company in Europe,
particularly in the southern and Eastern European markets. The subsidiaries
make talking about Volkswagen a little tricky, as there's the
(05:04):
Volkswagen Group that includes all the companies and brands like Audi,
in addition to Volkswagen the car company, which is specifically
the company that makes branded Volkswagen vehicles like the Beatle.
While Volkswagen was growing through these acquisitions, it was also
in some ways following a plan very similar to what
had been the cornerstone for the company during much of
(05:26):
its history. So for decades, the Beatle had been the
primary product from Volkswagen. While Volkswagen was finally retiring the
Beatle in this time, it was essentially doing the same thing.
It was following the same play with a different sensible car,
which would be the Golf. It's not incorrect to say
the Golf was intended for the same type of consumer
(05:49):
who previously would have purchased a Beatle, but Han recognized
that the strategy alone would not be enough to sustain
the company, and in fact, it was depending too heavily
upon any one veha a model is a recipe for
potential disaster if markets should change. With that in mind,
Han gave more freedom to the Audi division. Now, this
really isn't an episode about Aldi, so I don't want
(06:11):
to get too far off track here, but it would
mean that the Audi brand was given a bit more
slack to develop cars for a higher end market than
Volkswagen's Golf catered to. And it would give Audi the
the the freedom to start experimenting more and uh really
(06:31):
branching out from what it had been doing. Breaking free
of a perception that Audi was a brand that made
cars that old people liked. It was able to get
past that an Audi for the most part, operated as
an independent division within Volkswagen. Around this time forward, one
enormous political event that would hit close to home for
(06:52):
doctor Han quite literally was the reunification of Germany. Towards
the end of the nineteen eighties, it became clear that
the Soviet Union days were numbered, and that entire story
is far too big to fit into an episode about Volkswagen.
But one of the many consequences of the Soviet Union's
collapse was that East and West Germany would reunite into
(07:15):
a whole nation. Now, this was when the Berlin Wall,
which once stood as a symbol of oppression and authoritarianism
was pulled down to the ground. For Volkswagen, it would
mean the opportunity to establish new manufacturing facilities and what
had previously been Soviet controlled territory. As for dr Han,
(07:35):
the meaning was much more personal. He had grown up
in Chimnets, which is in eastern Germany. After World War Two,
his family left the region as that region was falling
to Soviet control. In fact, Dr hans father was one
of the founders of Auto Union, which would later evolve
into AUDI. So for Dr Han this was more than
(07:57):
just Volkswagen growing its production facilities. It was coming back
to a part of Germany that hadn't been you know,
approachable for years. It had been behind Soviet control, behind
the Iron Curtain. Part of hans reasoning, in fact, a
large part of it when it came to opening up
manufacturing facilities, was that relying upon a centralized production model
(08:20):
wasn't necessarily efficient or cost effective. He wanted to build
more plants in various regions so that the production facilities
weren't that far away from the people who were actually
buying the cars. That really cut down costs. If you're
building the stuff near where the people who want the
stuff can get the stuff, then you're cutting down costs significantly.
(08:40):
So he was looking ahead to a more unified Europe
and he wanted to build a car company capable of
flourishing in that environment. At the same time, expanding operations
costs a lot of money, and Volkswagen was spending a
ton to build out these manufacturing facilities. Moreover, Han felt
that the European market would serve as sort of the
(09:00):
foundation for the rest of Volkswagen's businesses around the world,
so most of his focus was on developing the European
market and investing in that market, which meant Volkswagen's presence
in other parts of the world, notably in North America
and the United States, really began to fade quite a bit.
Fans of Volkswagen in the US felt like they were
(09:21):
being neglected, something that stung more than a little bit
considering the fact that Dr Han had once been the
head of the American division of Volkswagen. The popularity of
Volkswagen in America had been on shaky ground since nine
when sales figures dipped from year to year. It went
down from nineteen one. Now the numbers fluctuated a bit
(09:43):
over the next several years. Sometimes they would go down
quite a bit, sometimes they would rebound a little bit.
But the general trend from nineteen eighty one all the
way to nineteen nine three was to see declines in sales.
And I'm sure most of you know that's the opposite
of what you want to see in a sales chart.
And when I say a decline, I mean there was
a really big drop off. So back in nineteen eighty
(10:06):
Volkswagen sold around three hundred thirty eight thousand vehicles in
the US market. In that number dropped down to fewer
than fifty thousand vehicles. So three d thirty eight thousand
down to less than fifty thousand. That's catastrophic. So what
caused that number to drop down so low in the
(10:27):
United States? Well, one reason was that the general consensus
was that the cars coming out of the American manufacturing
plant were substandard, and another was that the cars coming
out of Mexico were similarly unreliable, and the Puebla manufacturing
facility in Mexico was experiencing a ton of different problems.
(10:48):
So it wasn't until nineteen when Volkswagen introduced the third
generation of the Goulf and the third generation of the
Jetta models in the US that sales began to recover.
The American market was fiercely competitive at that time. Japanese
automakers were really filling in the void that had been
left by Volkswagen, and the Japanese companies were offering cars
(11:10):
that aimed at customers who were looking for reliable, inexpensive vehicles.
So in the nineteen seventies, if you were talking about
an auto import in the United States, you were probably
talking about Volkswagen. But by the mid eighties that had changed.
If you were talking about an import, you were probably
talking about Japanese car. And Dr Han didn't seem too
(11:31):
concerned about reversing that trend, as he was focused more
on the European market at the time. Now that's not
to say Volkswagen wasn't introducing new vehicles during Dr hans
time as CEO. The company produced new models like the
Volkswagen Santana also known as the Quantum, which evolved from
the Volkswagen Pasat. Volkswagen also made a few cars for
(11:53):
various regional markets like Brazil or Eastern Europe, and these
were very much peculiar to those agents. So if you
weren't from there, you were not likely to see one
of these types of Volkswagen's. In Volkswagen launched an ad
campaign in the United States that I still remember quite well.
The company introduced a new word to Planet Earth. That
(12:16):
new word was far fig nugan. This was technically a
brand new word made up of two existing German words.
You had fatherin, meaning to drive, and very NuGen, which
means enjoyment. So this was supposed to be about the
enjoyment of driving driving enjoyment varvig NuGen. This was not
(12:37):
an existing German word, rather one that was invented for
the ad campaign. However, I will say that the German
language frequently strings together multiple words to create a new word,
rather than just inventing a sensible short word to handle things.
That's why you will occasionally run into German words that
are incredibly long, because they've just strung together a bunch
(12:58):
of pre existing words to describe something new. Now, despite
the ad campaign, the general feeling in the US was
that Volkswagen was just focused on other markets and not
in North America. In Dr Han retired as CEO, and remember,
the worst year for North American sales would follow in
(13:20):
partly because Dr Hans strategy hadn't really supported the North
American market. The new head of the company would be
a man named Ferdinand Psh. And by the way, I know,
I butchered the pronunciation of Psh in a previous episode
when I talked about this family. But Ferdinand Psh had
previously helmed the Audi division under Volkswagen Group, and beyond that,
(13:43):
he traced his lineage back to the very founding of Volkswagen.
His grandfather was Ferdinand Porsche himself. His father was Anton Psh,
who married Ferdinand Porsche's daughter Louise headvig Annie Villehelmina Portschah.
What a name. And so if you listen to my
(14:05):
first episode in this series, you know that Anton Psh
had been the director of Volkswagen during World War Two.
That meant he was overseeing operations back when Volkswagen was
dependent upon forced labor, and reportedly he ran off with
a significant amount of money from Volkswagen while fleeing Allied forces.
(14:25):
In he would get arrested by French authorities along with
Ferdinand Porsche and spent a couple of years in jail
before finally being released. Well, Ferdinand pH had previously worked
at Porsche mainly in efforts to build high performance racing cars,
with the primary goal of building a vehicle that could
win the Laman's endurance race. This type of race is
(14:48):
different from those that are all about the first vehicle
to cross the finish line after a given number of
laps or distance. Instead, the winning vehicle at Lament's is
the one that has covered the most distance in a
twenty four hour period, So whichever car has gone the
furthest within twenty four hours across a predetermined route. Porsche
(15:11):
had been entering versions of its Porsche nine seventeen for
twenty five years before a Porsche driver took home the
top prize. Ferdinand had achieved his goal of engineering a
winning race car at great expense. In fact, it was
such an expensive endeavor that it nearly bankrupted Porsche. In
(15:32):
nineteen two, Ferdinand Psh would transition from Porsche to go
work at Audi. Now this wasn't necessarily by choice. Pasha's
obsession with creating faster racing cars had almost brought down
the company, and ownership of the company fell to two families,
the Porsche family and the pH family, and both of
(15:54):
those families trace their history back to the founder Ferdinand Porsche.
Both of them owned about fifty of the company Porsche,
and the two sides were beginning to fight with each other,
and I swear going through the stories makes it seem
like it's a season of Game of Thrones. We'll learn
more about that later in this episode. So in order
(16:15):
to prevent this rivalry from tearing the company to pieces,
the two families agreed that no one from either side
should be involved in the day to day operations of Porsche.
So that's why PSH would leave Porsche the car company Porsche,
not the holding company for Audi. Ferdinand. PSH would Transformality
(16:37):
from that brand that was being viewed as a bit
old fashioned in catering to the elderly into more of
a luxury sedan brand, and so it brought Audi into
competition against vehicle makers like BMW or Mercedes. But PSH
had grander designs. He wanted to head up Volkswagen itself.
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All right, let's get back to the episode. Now. We're
getting into an era in Volkswagen's history that was particularly
complicated by family politics. This stuff gets juice. There's betrayal,
there's shifty maneuvering, there's backstabbing, their extramarital affairs. I mean,
if you look at the Porstcha and PSH families from
(19:09):
the nineteen seventies to the two thousands and a little
bit beyond, it sounds like the stuff out of a
soap opera, like Dynasty or Dallas. It's crazy. On top
of that, we enter into a bizarre corporate structure in
which different companies gain a stake in each other, and
in some cases it looks to me like the whole
thing is oura borus. You know, the snake eating its
(19:32):
own tail. And I'll do my best a little bit
later in this episode to try and work out how
that actually ends up being structured. For no other reason
that to illustrate how the ownership of these companies is
incredibly complicated and at least to me somewhat ikey. In
the meantime, we've got other stuff to touch on now.
While I'll have lots of critical things to say about
(19:54):
pH one thing that's clear is that his ambition pushed
Volkswagen to new heights. He was reportedly a very hard
boss to work for, Like he was incredibly demanding and ruthless. Uh.
He was quick to throw you aside if he didn't
think you were useful. And there are a lot of
(20:16):
other negative things I could say. But in nine the
company would introduce the new Beatle and that would become
available for purchase in the United States the following year,
and that showed that they were now paying attention to
the North American market again and no longer keeping such
a laser focus just on Europe. This was a combat
car that was inspired by the original Beetle, but it
(20:38):
featured sleeker lines, front mounted inline four cylinder engine. If
you listen to the first part of the series you
remember that the original Volkswagen Beetle was an air cooled
rear mounted engine, so it was very different from that,
and Motor Trends would actually name it the import car
of the Year in nineteen Despite its small size, it
(21:00):
really wasn't the most efficient vehicle on the road. It
averaged twenty one miles per gallon. You would have thought
that perhaps it would have been a little better about that,
but no. Well, the new Beatle, along with an updated
Passat and a new Jetta model all helped revitalized Volkswagen
sales in North America after that market had been largely
(21:21):
forgotten about for more than a decade. Meanwhile, on the
corporate side of things, pH was leading some pretty serious
efforts to really expand Volkswagen's assets. One of the big
acquisitions at this time was Bentley Motors, the company that
had gone through a couple of changes in ownership, having
been part of Rolls Royce for nearly forty years before
(21:42):
a company called Vickers Plc purchased the Rolls Royce Motor
division in nineteen seventy. Twenty eight years after that, PSH
and Volkswagen came calling with an offer to purchase the
Bentley brand. Though Volkswagen would not acquire ownership of the
Rolls Royce logo or name, they did get hold of
the designs. They could use the car designs, but they
(22:04):
could not use the logo or name of Rolls Royce Bentley's.
In case you don't know, our luxury cars like as
luxury as luxury gets really crafts. People hand make many
of the details on the vehicles like you'll get like
hand carved dashboards, for example. So the manufacturing process is
(22:26):
guided by a human touch nearly every step of the way.
It is slow and methodical, and these are extremely expensive
luxury cars. They're also extremely British. The cost of the
acquisition was four hundred thirty million pounds. But we're not
done with Volkswagen's purchases in n yet. The company also
(22:48):
acquired the rights to use the Bugatti brand name. Now,
Bugatti has its own odd past. In fact, at this
point I think it must come as a prerequisite for
car companies. It was founded in the early twentieth century
by a Torre Bugatti, who built many successful race cars
in the early nineteen hundreds, but after his death in
(23:09):
the nineteen forties, the company kind of lost focus, and
by the nineteen fifties it had pretty much faded from memory.
It wasn't really producing cars anymore. In nineteen seven, Romano
are totally an entrepreneur, acquired the rights to the Bugatti
brand and built new manufacturing facilities with the the intent
of making Bugatti a prestige brand again. The new Bugatti
(23:32):
company produced several cars, but a recession in the nineteen
nineties took a big chunk of the company's assets and
it was essentially a failed business by so three years
later in nine Volkswagen acquires the brand name Bugatti and
starts up production with new model designs. So today the
Bugatti brand is associated with super cars that come with
(23:56):
incredible high end price tags. And I think it's most
a testament to Pasha's interest in fast cars, Like he
clearly always had a fascination with building incredibly fast vehicles,
and Bugatti are the type of cars that look like
they're going fast even when they're sitting still. And I'm
still not done with their acquisitions. One other big brand
(24:19):
that Volkswagen acquired that year was Lamborghini. That was the
Italian luxury sports car company. It's now part of Volkswagen
It was founded in the nineteen sixties. Largely it was
intended to be a competitor to Ferrari and developing high
performance race cars. As I mentioned earlier, is really expensive.
I mean it nearly bankrupted Porscha. Well for Lamborghini, that
(24:43):
they were having the same sort of issues. They were
spending way more money than they were making, and then that,
paired with the oil crisis of the nineteen seventies, meant
that very few orders for these high end sports cars
were coming in. It led to a disastrous collapse of
the Lamborghini company and the company went bankrupt and eighteen
seventy eight. A few years later, brothers Patrick and Jean
(25:04):
Claude Memroun revived Lamborghini and it became a brand uh
a new in the nineteen eighties, um with with models
like the Kuntash, which I remember as a kid, I
thought was the most amazing looking car I've ever seen.
But then they ended up selling Lamborghini to the Chrysler Corporation.
In Chrysler would in turn sell Lamborghini off to a
(25:26):
Malaysian company, and it was from that company the Volkswagen
would acquire the rights to the Lamborghini name. And designs. Now,
technically Lamborghini falls under the AUDI division at Volkswagen, and
as I mentioned before, AUDI gets to operate more or
less independently from Volkswagen, but it belongs to Volkswagen Groups.
So Lamborghini is one of the brands under the Volkswagen
(25:47):
Group name. All right, let's skip ahead to two thousand two.
Volkswagen announced two new lines of vehicles that year. There
was the Phaeton line that was a luxury car brand,
and there was the Tourig line, which are SUVs. Now.
This was also the year that ferinand Psh would step
out of the role of CEO for Volkswagen and he
(26:08):
became the chairman of the board for Volkswagen Group for
their supervisory and steering committees. pH would continue to have
significant influence within the company. His successor as CEO was
an engineer named Burned Peter Pischets Reader and I'm sure
of butchered that last name, so we're just gonna call
him Burnt because it's a lot easier. In two thousand three,
(26:32):
the final Type one Beatle, the original Volkswagen vehicle model
that carried the company for decades, rolled off the manufacturing
facility in Pueblo, Mexico, and it was actually given a number.
It was number. It was car number twenty one million,
five thousand, four hundred sixty four. It was not sold
(26:54):
off to some lucky motorist. Instead, it was actually shipped
back to Volkswagen's headquarters in Volksburg, Germany, because, as Indiana
Jones would say, it belongs in a museum. Burnt would
only stay at CEO for just a few short years
before he was essentially forced to resign, and allegedly the
(27:17):
reason that he was forced to resign was because he
was frequently coming to disagreements with pH, who really wanted
to keep control of this company. Martin Winterkorn, who had
been the leader for the AUDI division, would then step
in to take over the role as CEO. That would
happen in January two seven, and winter Corn had been
(27:39):
a pH protege though that would be put to the
test in a big, big way. So at first pH thought,
oh yeah, now I've got my guy in this space,
even though the pH had handpicked Burnt earlier. So um,
the fact that he kept getting burned by people that
he picked might say more about his management style, I guess.
(28:00):
In two thousand and eight, Volkswagen announced plans to build
an assembly plant in Chattanooga, Tennessee, a billion dollar assembly plant.
It would be finished by two thousand eleven. And this
was the goal of producing cars for the American market,
you know, within the market itself again, to augment Volkswagen's
production facilities and reduce the cost of getting cars to Americans.
(28:24):
That was also the year when we would see a
game of thrones like struggle really heat up. So let
me see if I can sort all of this out.
This is also gonna mean sticking with this particular story
and skipping some other stuff in the timeline for now,
but I want to try and work my way through
this whole sordid affair, alright. So this is really the
story of two companies, Volkswagen Group and Porsche se which
(28:48):
is a holding company. And it's also the story of
two families, the Porsche family and the related pH family,
their cousins to each other, and both of these trace
their lineage to Ferdinand Porsche, the founder of both Porsche
the auto company and Volkswagen the auto company. And it's
also about a lot of complex corporate maneuvers that frankly,
(29:10):
I don't fully understand, because tech is easy, but corporate
structures are really hard. Okay, So the Porsche pH families
own a holding company called Porsche s E. And now, typically,
a holding company's purpose is to create a central point
of control for multiple distinct businesses while simultaneously isolating those
(29:33):
businesses enough so that if one should fail or falter,
it doesn't drag the others down with it. So it's
a way to limit liability in other words, And each
business under a holding company performs as its own distinct business,
though it ultimately is under the umbrella of the parent
holding company. The holding company holds assets and equity, but
(29:54):
doesn't get involved in the day to day operations of
the business it holds, so you can think of it
as the business owners but not the business operators. At
least that's how it usually goes. So let's lay out
the arrangement here. So Anton Psh and Ferdinand Porsche first
founded the company that would evolve into portscha Se way
(30:15):
back in the nineteen thirties, and this is that holding
company that oversees assets. Essentially, this company holds the assets
of the Porsche and Psh families. It it funnels all
of the shares that all the different members of these
families have and represents their ownership of Porsche um. Different
(30:36):
members of the family, oh own different numbers of shares,
so like one person in Porsche family might own twice
as many shares as most of the other members of
the families. So just imagine a really big family of
people who don't really get along all that well with
one another, and they all own some part of this
(30:59):
holding company. Okay, so Porsche SE in turn owns the
family interest in another holding company called Porsche Vision Holding.
I oh, you Germans Vision Holding essentially means intermediate holding company,
(31:20):
which I mean that tracks right like it's a holding
company that's owned by a different holding company. Now, to
be fair, it's a little more complicated than even that.
This is starting to turn into like a Russian nesting
doll situation here. But the Porsche pH families own fifty
point one percent of this intermediary holding company. So you
(31:41):
can think of Porsche SE as the organization that holds
the assets that in turn represent controlling interest in another
holding company. But it's this intermediary holding company that owns
one hundred percent of Porsche Automobile Group that that's the
actual car manufacturing company that's responsible for building and selling
(32:04):
Porsche vehicles. So you know, Porsche se which represents the
family Porsche pH interest in Porsche's Vision Holding and that
in turn owns Porsche Automobile Group, got it because I
don't now Porsche had as in the car company had
(32:25):
a long history of being involved with Volkswagen's operations since
the very beginning, and the holding company had a five
percent stake in Volkswagen up until two thousand five, So
the Porsche Holding Company also owned some ownership in Volkswagen,
a small amount five percent, But in two thousand five
Porsche acquired more shares in Volkswagen and increased the ownership
(32:49):
to twenty percent. So now the Porsche Holding Company owns
one fifth of Volkswagen. For a while, it looked like
that was all that they could do, because is the
German government had actually passed a law specifically for Volkswagen
that prevented any single shareholder from acquiring more than of
(33:10):
the ownership of the company. And this was in large
part because Lower Saxony, the government region of Lower Saxony,
was an owner of Volkswagen. If you listen to my
first episode you remember I mentioned that that the trade
unions still to this day have a powerful voice within
the operations of Volkswagen, and technically Lower Saxony had a
(33:34):
little more than ownership of Volkswagen. So by passing this law,
Germany was preventing anyone else from getting more power in
the company than Lower Saxony had, So this government group
would have the most powerful say in the company as
(33:54):
long as everyone else was limited to ownership or less.
But then the European Union come challenged this law in
two thousand seven and things started to change, and perhaps
emboldened by that challenge, the Porsche Holding Company increased its
steak in Volkswagen to nearly of the shares, so now
it owned more of Volkswagen than Lower Saxony did. Little
(34:18):
by little Porsche would add more shares of Volkswagen to
its steak, and the process was incredibly expensive. So by
two thousand nine, when Porsche held more than fifty percent
ownership so it had controlling interest in Volkswagen, it became
clear that it was not going to be sustainable. Porsche
of the company was in debt up to its corporate eyeballs.
(34:39):
So then in a move that I still find perplexing.
Volkswagen goes and acquires forty nine point nine percent ownership
in Porsche Automobile Group as in the actual automobile company.
All right, now, follow me here. Porsche the holding company
takes majority ownership of Volkswagen Group. Volks Wagon Group has
(35:01):
nearly fifty percent ownership of the Porsche Car Company. Say
I told you this was confusing. Now, at this point,
the Volkswagen and Porsche companies were in talks of actually
merging together, but that didn't happen as the EU Commission
seemed ready to oppose the move and there were some
legal risks, but that would all get settled by two
(35:22):
thousand twelve because then Volkswagen would go ahead and purchase
the remaining interest in the Porsche Automotive Company, not the
holding company, but the actual car company. In addition, managers
in Volkswagen were to become managers in Porsche s C,
which would ensure that Volkswagen would remain the dominant party
at the table. Now, another part of the reason why
(35:43):
this all gets so messy is that the families involved
were feuding. On the Porsche side, you had Wolfgang Porsche,
who was widely regarded as the head of that family,
so you can think of Wolfgang as the godfather of
the Porsche's. On the pH side, you had Ferdinand pH,
the former Volkswagen CEO and then the chairman of Volkswagen's
(36:04):
Supervisory Board. The two were trying to outmaneuver each other
throughout this entire process, and pH had clear contempt for
his cousin. There are lots of stories about pH insulting
the Porsche side of the family, with one report claiming
that pH likened the Porsche's two pigs and then likened
(36:24):
himself to a bore. And what he was saying, well,
he was alluding to the fact that he Psh had
grown up going to a tough boarding school, and he
had put in the work to grow Volkswagen over the years.
He was an engineer, he actually did the work, whereas
the Porsche side, all of them went to fancy prep schools,
(36:45):
they had no interest in engineering, and most of them
were lawyers, so it was clear he didn't have a
very high opinion. This would continue to boil over over
the following years. I'll explain more in just a moment,
but first let's take another quick break. Okay, So that
(37:07):
whole corporate mess. I just covered kind of boils down
to Volfgang Porsche and Ferdinand pH facing off against each other,
with pH ultimately winning at least a little bit. And
if it weren't for that darn diesel Gate scandal, this
would likely be the most crazy part of the Volkswagen story.
But then we do have the diesel Gate scandals. Let's
(37:29):
talk about what that was and what it means. So
back in the mid two thousand's, Volkswagen began to make
a serious marketing push, designing diesel based vehicles for the
United States and other markets and instead of gasoline powered vehicles.
So diesel engines were invented by a guy named Diesel,
and he built a combustion engine that he intended to
(37:51):
run off of stuff like peanut oil. And in fact,
you can run diesel engines off of some plant based oils.
Sometimes you want to do a little bit of processing
before you do that, but you can do it. Diesel
engines can't run at a much higher efficiency than gasoline engines,
so you can run a diesel engine for longer with
a comparable amount of fuel than a gasoline engine. Now
(38:13):
I could do a full episode to lay out the
differences between diesel and gasoline engines, but really for the consumer,
a big differentiating factor is just how far you can
travel per given amount of fuel. Diesel cars get more
miles to the gallon than gasoline based cars, and there
are a lot of other factors that determine whether or
not it makes financial sense to go with diesel over gasoline.
(38:35):
That includes the cost of the fuel, because if diesel
is significantly more expensive the gasoline, you have to factor
that in as well as the purchase price of the vehicle.
Of diesel vehicles are more expensive than you may not
see a financial benefit to going with diesel as opposed
to gasoline, but that's neither here nor there for the scandal. Now,
one of the things car companies must do is they
(38:55):
have to meet emissions standards with their vehicles in order
to be able to do business within certain countries like
the United States. And this is all related to environmental impact.
So your cars have to perform at a certain standard,
you know, beneath a threshold, or the United States government
doesn't allow you to sell those cars in the US market.
(39:16):
So back in the mid two thousand's, some engineers at
Volkswagen we're trying to figure out how to make a
diesel engine that would operate within the restrictions on emissions
that the United States government had established. But they also
were working with very tight restrictions within Volkswagen itself. So
the culture within Volkswagen was success at any cost. I mean,
(39:38):
pH had had proven that he was willing to spend
tons of money to succeed at various engineering tasks, but
at the same time, the restrictions were so tight on
this department, they didn't have very many options. So they
realized that rather than actually changing the engine, which was
going to be very expensive and beyond the budget they
were given and beyond their capabilities, they could instead make
(40:00):
a few tweaks to some software algorithms to make the
engines operate at or below emissions thresholds, and that would
allow them to stay within budget for the development of
the cars. There's only one problem. The tweaks meant that
Volkswagen was going to essentially be cheating on emissions tests. Now,
this didn't get discovered right away. It wasn't until two
(40:22):
thousand fourteen when some West Virginia University researchers found that
two cars that they were testing a Volkswagen Jetta and
a Volkswagen Pasat emitted much higher emissions levels than what
they should be doing based upon emissions testing. Now. Volkswagen's
official response initially anyway, was that there must have been
(40:44):
some sort of unexpected technical issue and unusual test conditions
that led to this. Engineers at Volkswagen sent a memo
to CEO Martin winter Corn at the time or vinter Corn,
but it's not known if vinter Corn actually saw that
particular memo because it was bundled with a whole bunch
of other memos at the time. Um there are a
lot of people who suggest that perhaps he knew about
(41:04):
this early on, and others who say that maybe he didn't. Well,
Volkswagen would issue a recall on diesel vehicles. They recalled
all of them. I guess it's recall, not a recall
behind the current guys. I've had two hours sleep, So anyway,
the California Air Resources Board or CARB would then find
(41:25):
some irregularities on supposedly fixed vehicles in two thousand fifteen.
These are vehicles that Volkswagen had supposedly recalled and then
fixed and then put back into the market. But the
CARB was finding that there were still these irregularities. Then
the engineers at CARB we're finding that Volkswagen's explanations for
(41:48):
why those irregularities were happening didn't seem to actually match
up what they were seeing. Then the Environmental Protection Agency
goes and tells Volkswagen, Hey, you know, we're not gonna
let you sell any of your twenty six d SILD
vehicles in the United States. And it was at that
point the Volkswagen said, oh, um, are bad. Actually, we
just found out there's some software regularities, and then they
(42:08):
explained what was going on, and that leads us to
the actual scandal. So essentially, when the vehicle's computer detected
that it was going into emissions testing, that someone was
connecting their testing equipment to the vehicle's computer, it would
then engage systems that would limit emissions. They would also
(42:29):
decrease engine performance. Now, if the cars just operated in
that mode all the time, we wouldn't be talking about
a scandal. But Volkswagen probably wouldn't have seen as many
sales because drivers would be disappointed. They would feel like
the cars were not performing very well, they were underpowered,
their performance just wouldn't meet expectations. So in order to
(42:51):
meet expectations, they needed to have the engines have a
higher output of power. But if they did the higher
outpuput of power, you have higher emissions. So if a
Volkswagen diesel cars computer detected that it was connected to
emissions testing, it would initiate this dampening system and you
(43:12):
would have lower emissions and lower output. But then once
it was detected that it was no longer connected to
an emissions testing machine, it would disengage those dampening systems
and the car's performance would improve significantly, but it would
also emit way more pollution, including stuff like nitrogen oxide,
(43:33):
and it would be well beyond what was the emissions threshold.
So in other words, the cars were cheating on tests.
When the teacher was looking, and in this case the
teacher is someone performing an emissions test, then the vehicle
would pull its punches and purposefully underperform, emitting fewer gases,
and then once the teacher was looking somewhere else, it
(43:55):
was party time. Well. The e p A was not
amused and concluded the Volkswagen had purposefully tried to circumvent
the Clean Air Act in the United States, and further
that the Department of Justice would have the authority to
impose a total of thirty seven thousand, five hundred dollars
of civil finds per vehicle that used this kind of
(44:16):
work around, like as in each individual vehicle. The defeat
devices were in vehicles spanning model years from two thousand
nine to two thousand sixteen, so if you added them
all up, it would mean that Volkswagen could potentially face
a maximum up to eighteen billion dollars in fines alone.
(44:37):
Volkswagen then admitted that the same defeat system was in
place in eleven million diesel cars around the world, and
that Volkswagen had already set aside several billion dollars worth
to fix these affected cars. Then came criminal proceedings against
engineers and executives at Volkswagen, both in the United States
and in Germany, as well as a scramble to figure
(44:59):
out how to buy back vehicles that didn't meet the
emission standards. So in total it would cost Volkswagen around
thirty billion dollars. That is a princely sum and an
enormously expensive mistake. And mistake in judgment, I should say,
it's not like they accidentally did this. They the engineers
(45:21):
that did this did this knowingly, and the costs went
beyond the monetary Martin went vinder Korn, who was CEO
when the scandal first broke, would end up accepting responsibility,
but he also denied that he had had any personal
wrongdoing involved in this. He said that he had no
direct hand knowledge and he had no uh direct involvement
(45:43):
in the decision to try and circumvent clean air laws.
But he also said that as CEO, he has to
be held responsible for this sort of thing happening under
his watch. So he resigned his position and he was
replaced by Matthias Mueller, who pledged to cooperate with investigators
to get to the bottom of who was responsible, while
also making amends to customers who were directly affected by
(46:06):
the scheme. Now, Mueller was previously the CEO of Porsche,
which also would end up getting pulled into this diesel
Gate scandal. It wasn't just Volkswagen vehicles. There are also
some Porsche vehicles and Aldi vehicles that would be involved
in this. So he would serve as Volkswagen CEO only
until two thousand eighteen, and that was when the Board
(46:26):
of Directors kicked him out, largely because the company as
a whole had been perceived as moving too slowly to
address the problems that arose due to Diesel Gate. So
his replacement was Herbert die who was formerly the brand
chief over at Volkswagen. So this is becoming like a
revolving door situation with these quick turnarounds and CEOs. Ferdinand
(46:48):
Psh resigned from the supervisory board of Volkswagen in April
two fifteen. This would be before Martin Vinterkorn was had
to resign. Then pH would sell off his shares in
Volkswagen in May of two thousand fifteen, essentially divorcing himself
from the company entirely. This predated Martin Vintercorne's resignation as well,
(47:11):
So in fact Psh was attempting to have Vindercorn actually
removed as CEO, and this is what led to pH
to saying he was going to step away from the company.
He voted to have Vindercorn removed, but he was the
only member of the steering committee to do so. Uh,
the others all voted against him, and Wolfgang Porsche, his rival,
his cousin, was one of the parties who was, you know,
(47:34):
essentially campaigning against pH. So pH left the company, sold
off his interest, and then he threw a whole bunch
of executives under the bus as he left. He implied
that a lot of people in senior levels of management,
including all the way up to the executive level, knew
about and had approved of, the illegal technology that allowed
(47:56):
Volkswagen's diesel engines to cheat on emissions tests. Now, whether
his allegations were true or not was uncertain, But he
dumped a ton of fuel on the fire, and I
guess it must have been gasoline fuel, because diesel doesn't
burn like gasolene does. Don't try that at home. Pish
would end up passing away at age eighty two in
two thousand nineteen. He left behind twelve or maybe thirteen children.
(48:22):
The numbers aren't entirely clear. There are a lot. There's
a lot of actual disagreement. Um, he was married twice
and he had a couple of kids outside of marriage.
In fact, one a couple of them were with the
estranged wife of his cousin, So he had an affair
with his cousin's wife. Told you this was like game
of Thrones, man, I was not kidding. So Volkswagen is
(48:46):
still managing the consequences of diesel Gate. To this day,
CEO Herbert Diese is at the center of some criminal
charges that state he and other Volkswagen executives were waiting
too long to inform investors of the extent and nature
of the diesel Gate scandal, and that as such they
were essentially committing fraud. They were telling investors that the
(49:06):
company was in much better shape than it actually was. Meanwhile,
Volkswagen is trying to move beyond this disaster. It has
announced a plan that by t we're gonna see the
company producing one and a half million electric cars, and
that number actually keeps climbing, so it might be higher
by the time you hear this episode in Volkswagen also
produced the final Edition Volkswagen Beetle, which was an updated
(49:30):
version of the new Beatle, and that that last one,
the very last final edition Volkswagen Beetle, rolled off the
production line in July two th nineteen. So now the
Volkswagen Beetle is retired again. But who knows, maybe the
company is going to bring it back out of retirement
one more time in an effort to climb out of
(49:52):
this massive mess. It finds itself in and that's where
Volkswagen is today. As I said, I found this story
to be fascinating, not just from a technological standpoint, but
just from the political, social, corporate side. It's so complicated,
and it's it's so so closely tied with family feuding.
(50:13):
I had no idea about Volkswagen's involvement with the Porsche family,
um largely because it's a European company, and my my
vision of Volkswagen has always been the Volkswagen Beetle. That's
if you say the word Volkswagen to me, I think
of the old VW Beetle and this sort of quirky,
(50:33):
iconic vehicle that's associated with like the hippies and the
the Summer of Love and that kind of stuff, and
and Disney movies. I don't think of a company that
was founded, you know, and well or at least funded
by Nazis and then run by various people who were
(50:53):
having crazy feuds with each other in power struggles like
None of that ever occurred to me, And I definitely
didn't know that Volkswagen had purchased brands like Lamborghini and Bugatti,
probably because those cars are just a hair outside of
my price range. By a few hundred thousand dollars, but
(51:14):
it was an interesting thing to look into. If you
guys have any suggestions for future topics of tech stuff,
whether it's a company, a technology, maybe it's a trend
in tech you would like me to talk about, let
me know. Send me a message on Facebook or Twitter.
The handle we use at both of those is tech
Stuff HSW and I'll talk to you again really soon.
(51:40):
Tex Stuff is a production of I Heart Radio's How
Stuff Works. For more podcasts from my heart Radio, visit
the i heart Radio app, Apple Podcasts, or wherever you
listen to your favorite shows.
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Karah Preiss
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