Porsche chiefs quit as talks bring merger with Volkswagen closer

Man who saved luxury car maker to get €50m pay-off

Porsche and Volkswagen (VW) inched closer to a merger yesterday after a 15-hour all-night board meeting at Porsche concluded with the dismissal of the company's two top executives and an agreement to raise €5bn (£4.3bn) of capital.

Further talks are now under way at both Porsche and VW to decide on the structure of the deal, which will create an automotive giant controlling 10 different marques, including Seat, Bentley and Audi as well as the eponymous brands. As part of the deal, Qatar's sovereign wealth fund – which has been in talks with Porsche for some weeks – will take a 17 per cent stake in VW, becoming its third-largest investor.

Porsche's chief executive, Wendelin Wiedeking, and chief financial officer, Holger Härter, are stepping down immediately, though they will remain available in an advisory capacity, the company said. Dr Wiedeking, who is credited with taking the luxury sports carmaker from near collapse to becoming one of the world's most profitable car companies, will receive a pay-off of €50m (£43m) for the termination of his contract three years early, one of the highest compensation packages in German corporate history. Mr Härter will receive €12.5m.

The latest move comes after months of wrangling over the future of the two companies. Initially, Porsche was the aggressor, despite its target's revenues coming in at 15 times its own. By January, under Dr Wiedeking's strategy, Porsche held more than 51 per cent of its larger rival and was openly admitting it wanted 75 per cent. But by April the tables were turning, and the €9bn debt pile accrued in the process was causing problems. April's €10bn financing only just scraped through, and Dr Wiedeking's position was under stress. Merger talks with VW included calls for his resignation in favour of VW's chief executive, Martin Winterkorn, from Ferdinand Piëch, VW's chairman and also a key Porsche shareholder.

The two resignations were in the strategic interests of the group, Porsche said yesterday. "[Dr Wiedeking and Mr Härter] see that step as a significant contribution to the appeasement of the situation and to support the forming of an integrated car manufacturing company," the company said. "Both gentlemen will accompany the handover at the board of management level positively and support their respective successors in their tasks."

Meanwhile, the VW board endorsed the creation of an integrated group, and said it was engaged in drawing up the structure of the deal. Mr Winterkorn emphasised that Porsche will remain independent within the wider VW group.

"The envisaged union of Volkswagen and Porsche follows a compelling industrial logic and offers promising perspectives: it makes two strong companies even stronger," he said. "Like Audi today, Porsche can also continue its independent development under the aegis of Volkswagen and preserve its own identity."

Michael Macht, has been running Porsche's production and logistics operations, takes over as chief executive immediately. Thomas Edig, the human resources director, becomes his deputy.

Mr Wiedeking, who faced criticism for earnings topping €80m last year, said he will give half his €50m compensation to charity.

"Personal reasons, and also my responsibility towards society, have led to my decision to donate a material amount of money for social purposes," he said yesterday. "Over and above this I will invest in projects targeting at creating jobs in Germany. I do pay my taxes in Germany, with roughly half of my income being transferred to the state."