Volkswagen: pure greed

The story is out already a few days, here is a good summary:

"The who, what and why of Volkswagen’s diesel scandal"

One snippet:


"In the past, Europe has been quite loose on its regulations, resulting in around one-third of European cars running on diesel, however it’s also the reason why big cities such as Paris and London have smog problems. In fact, almost 29,000 people die each year in the UK due to air pollution.

But in 2009 two things happened that would make diesel appealing in the USA.

Increasingly, drivers wanted to get better fuel economy, while at the same time diesel technology had supposedly become cleaner. Companies such as Volkswagen took advantage of this to break into the huge US market, offering “clean diesel” cars that theoretically offered great fuel economy without giving off too much poisonous NOx.

There was just one problem — their cars couldn’t actually do that."


An amazing story, for such a large company. Repercussions will be huge, the CEO stepped down already, cars will be recalled, large fines will be meted out.

I can only think of one reason for what Volkswagen did: pure greed.

Should we be completely surprised about all this? May be not, I wrote before about the strange case where Volkswagen and Porsche might have gotten away with what they did in the German courts, but if it was ethical, I doubt it.

Porsche: The Hedge Fund that Also Made Cars

Amazing story regarding Porsche and Volkswagen, so weird you can't make it up.

As one commenter wrote: "Game of Thrones - German Car Company Edition"

Some snippets:


Volkswagen, from "was widely considered by the financial community to be a pretty crappy company, which is why it was trading at such a low multiple of revenue" to "the most valuable company in the world".

As a result, Volkswagen became one of the most shorted stocks on the market.

This maneuver of secretly buying shares would have been (and still would be) illegal in the United States. In Germany though, where Porsche is based, it was likely legal.

And precisely when Porsche needed banks the most, banks stopped lending money. The words spoken by the company’s CFO years before -- “banks are there for you when you don’t need them, and when you do need them, they’re no where to be seen” -- now seemed prophetic.

The financial markets were baffled by Porsche’s acquisition of Volkswagen shares. Why was a sports car company pouring so much money into a struggling mass-market car company? It seemed to be the equivalent of a company like Hermes announcing it was taking a large stake in Old Navy.

In the blink of an eye, Porsche went from predator to prey. Once on the brink of acquiring Volkswagen, Porsche now found itself borrowing a billion dollars from them just five months later.

“According  to rumour, Ferdinand Piëch likes to run chickens off the road in his Volkswagen Touareg. Whether that is true or not, he certainly tends to ride roughshod over humans, metaphorically at least.”

In 1972, as a married man with five children, Piëch struck up an extra-marital affair with Marlene Porsche -- the wife of his cousin and fellow heir, Gerd Porsche. You can imagine that taking up with your cousin’s wife might make things awkward at Porsche-Piëch family reunions and company board meetings.

So, what is to be learned from the saga of Porsche?

First, if you’re a car company, it’s probably best to focus on making cars instead of gravity-defying financial maneuvers.

Second, capital has a tendency to be there when times are great, but disappears when you need it most.

Finally, if you’re going to go shoot the king, don’t miss.


I wrote before about the hedge fund shorting Volkswagen's shares.