1 00:00:04,240 --> 00:00:07,240 Speaker 1: Welcome to tech Stuff, a production of I Heart Radios 2 00:00:07,320 --> 00:00:14,080 Speaker 1: How Stuff Works. Hey there, and welcome to tech Stuff. 3 00:00:14,120 --> 00:00:17,279 Speaker 1: I'm your host, Jonathan Strickland. I'm an executive producer with 4 00:00:17,320 --> 00:00:20,600 Speaker 1: I Heart Radio and I love all things tech. And 5 00:00:20,680 --> 00:00:24,880 Speaker 1: we are continuing with our story about Volkswagen. And in 6 00:00:24,920 --> 00:00:29,120 Speaker 1: our last episode, we made our way up to ninety 7 00:00:29,280 --> 00:00:32,920 Speaker 1: two when Dr Carl hand, the former head of Volkswagen 8 00:00:32,960 --> 00:00:38,320 Speaker 1: America and the person whom former CEO Heinrich Nordhoff had 9 00:00:38,520 --> 00:00:41,560 Speaker 1: handpicked way back in the nineteen sixties to be the 10 00:00:41,680 --> 00:00:45,640 Speaker 1: leader of the company, would actually fulfill that vision. In 11 00:00:45,720 --> 00:00:49,080 Speaker 1: the interim, Volkswagen had leaders who had pushed the company 12 00:00:49,080 --> 00:00:53,040 Speaker 1: beyond its dependence upon the Type one car. Type one 13 00:00:53,159 --> 00:00:56,959 Speaker 1: is what we in America called the Volkswagen Beatle. Now, 14 00:00:56,960 --> 00:01:01,800 Speaker 1: in fact, Volkswagen's manufacturing facilities in Germany had already stopped 15 00:01:01,880 --> 00:01:06,840 Speaker 1: producing the Beatle by early nineteen eighty. The original plan 16 00:01:06,920 --> 00:01:09,360 Speaker 1: was to stop in nineteen seventy nine, but as they 17 00:01:09,400 --> 00:01:12,960 Speaker 1: were getting towards the end of the year, they realized 18 00:01:13,000 --> 00:01:16,200 Speaker 1: that they had way too many orders to fill. They 19 00:01:16,200 --> 00:01:19,319 Speaker 1: had to actually keep going, keep producing beyond when they 20 00:01:19,319 --> 00:01:21,440 Speaker 1: had planned to stop, in order to meet those demands 21 00:01:22,120 --> 00:01:25,280 Speaker 1: and to keep building that reliable little car. By mid 22 00:01:25,400 --> 00:01:28,800 Speaker 1: nineteen eighty, that had changed and production had shifted to 23 00:01:29,040 --> 00:01:32,600 Speaker 1: Volkswagen's facilities in Brazil and Mexico, so the Beetle was 24 00:01:32,600 --> 00:01:34,679 Speaker 1: still being produced there, but was no longer being produced 25 00:01:34,720 --> 00:01:37,759 Speaker 1: in Germany. While the company made far fewer of the 26 00:01:37,800 --> 00:01:41,720 Speaker 1: Type one vehicles, the facility in Puebla, Mexico churned them 27 00:01:41,760 --> 00:01:45,920 Speaker 1: out all the way up until two thousand three. That 28 00:01:45,959 --> 00:01:49,920 Speaker 1: means Volkswagen was making the Type one air cooled rear 29 00:01:49,960 --> 00:01:55,360 Speaker 1: engine Volkswagen Beetle for nearly sixty years without an eruption. 30 00:01:56,160 --> 00:01:59,920 Speaker 1: In Mexico, the car became a popular option for tack 31 00:02:00,000 --> 00:02:04,120 Speaker 1: sea drivers because the vehicles were small, they had good traction, 32 00:02:04,600 --> 00:02:06,960 Speaker 1: and they were easy to maintain due to their simple 33 00:02:06,960 --> 00:02:12,960 Speaker 1: mechanical structure. Eventually, in the Mexican government outlawed the Beatle 34 00:02:13,320 --> 00:02:17,640 Speaker 1: as a taxi cab car, deeming it too unsafe for 35 00:02:17,680 --> 00:02:21,480 Speaker 1: that purpose. Oh and before I move on, I should 36 00:02:21,520 --> 00:02:25,840 Speaker 1: at least mention that Volkswagen began making the Jetta model 37 00:02:25,960 --> 00:02:29,320 Speaker 1: of vehicles starting in nineteen seventy nine. The design of 38 00:02:29,360 --> 00:02:32,520 Speaker 1: the Jetta aimed at a customer that wanted something a 39 00:02:32,520 --> 00:02:36,000 Speaker 1: bit larger than the Volkswagen Golf known as the Rabbit 40 00:02:36,160 --> 00:02:38,799 Speaker 1: here in the United States, and the Jetta is one 41 00:02:38,800 --> 00:02:42,359 Speaker 1: of the models Volkswagen still produces today and is consistently 42 00:02:42,440 --> 00:02:45,760 Speaker 1: one of their more popular models. It also comes in 43 00:02:45,840 --> 00:02:49,720 Speaker 1: a lot of different configurations. Two door, four door, five door. 44 00:02:50,240 --> 00:02:52,720 Speaker 1: I had to mention it because my producer Tari used 45 00:02:52,760 --> 00:02:55,440 Speaker 1: to drive one, though she drove a more recent model 46 00:02:55,520 --> 00:02:58,680 Speaker 1: than in nineteen seventy nine Jetta. I imagine she's nodding 47 00:02:58,800 --> 00:03:02,360 Speaker 1: yes in case he can't hear her nod. But let's 48 00:03:02,400 --> 00:03:06,200 Speaker 1: talk about Volkswagen the company from the time Doctor Han 49 00:03:06,320 --> 00:03:10,080 Speaker 1: took over up to present day now. One measure that 50 00:03:10,160 --> 00:03:14,079 Speaker 1: Han took was to work with China to establish Volkswagen's 51 00:03:14,120 --> 00:03:19,200 Speaker 1: presence in the vast Chinese market. In the early nineteen eighties, 52 00:03:19,520 --> 00:03:24,320 Speaker 1: China was just starting to enter into a massive economic transformation, 53 00:03:24,680 --> 00:03:28,160 Speaker 1: one that we're still seeing play out today. Volkswagen would 54 00:03:28,200 --> 00:03:30,839 Speaker 1: be one of the first Western automotive companies to work 55 00:03:30,840 --> 00:03:35,000 Speaker 1: with China. In fact, it was the first Western automotive 56 00:03:35,000 --> 00:03:38,080 Speaker 1: company to work with China to create an early automobile 57 00:03:38,120 --> 00:03:41,240 Speaker 1: industry in that nation. It would be incredibly important both 58 00:03:41,280 --> 00:03:44,800 Speaker 1: to China and to Volkswagen itself. After all, China has 59 00:03:44,880 --> 00:03:48,240 Speaker 1: the largest population of any country in the world, and 60 00:03:48,280 --> 00:03:52,080 Speaker 1: for several years Volkswagen was the only non Chinese car 61 00:03:52,160 --> 00:03:55,400 Speaker 1: company operating within that country, and as you might imagine, 62 00:03:55,400 --> 00:03:58,000 Speaker 1: that meant Volkswagen was able to get a big jump 63 00:03:58,360 --> 00:04:01,960 Speaker 1: on top of the other car company. Today, Volkswagen and 64 00:04:02,000 --> 00:04:05,320 Speaker 1: its partners manufactured vehicles and parts in more than thirty 65 00:04:05,360 --> 00:04:11,080 Speaker 1: manufacturing facilities throughout China. Dr Hahn also continued Volkswagen's practice 66 00:04:11,120 --> 00:04:15,240 Speaker 1: of acquiring other companies, and acquisitions are going to play 67 00:04:15,280 --> 00:04:18,720 Speaker 1: a really big part in today's episode as well. Here later, 68 00:04:19,400 --> 00:04:22,360 Speaker 1: but he oversaw the completion of Volkswagen's acquisition of fift 69 00:04:23,440 --> 00:04:27,120 Speaker 1: of the Spanish car company Seat in nineteen eight six, 70 00:04:27,440 --> 00:04:31,600 Speaker 1: as well as gaining a substantial stake in a check 71 00:04:31,800 --> 00:04:36,400 Speaker 1: company called Skota in nineteen These two companies would be 72 00:04:36,440 --> 00:04:40,880 Speaker 1: the first non German subsidiaries for Volkswagen. The first subsidiary, 73 00:04:40,920 --> 00:04:43,440 Speaker 1: if you remember from the last episode, was Audi that 74 00:04:43,560 --> 00:04:47,760 Speaker 1: was another German car company, though Volkswagen would later acquire 75 00:04:47,880 --> 00:04:51,359 Speaker 1: more ownership of both car companies, eventually owning both outright, 76 00:04:51,760 --> 00:04:55,080 Speaker 1: and Volkswagen would become a leading car company in Europe, 77 00:04:55,279 --> 00:05:00,920 Speaker 1: particularly in the southern and Eastern European markets. The subsidiaries 78 00:05:00,960 --> 00:05:04,120 Speaker 1: make talking about Volkswagen a little tricky, as there's the 79 00:05:04,200 --> 00:05:08,880 Speaker 1: Volkswagen Group that includes all the companies and brands like Audi, 80 00:05:08,960 --> 00:05:12,920 Speaker 1: in addition to Volkswagen the car company, which is specifically 81 00:05:12,960 --> 00:05:16,520 Speaker 1: the company that makes branded Volkswagen vehicles like the Beatle. 82 00:05:17,200 --> 00:05:21,000 Speaker 1: While Volkswagen was growing through these acquisitions, it was also 83 00:05:21,040 --> 00:05:23,640 Speaker 1: in some ways following a plan very similar to what 84 00:05:23,839 --> 00:05:26,159 Speaker 1: had been the cornerstone for the company during much of 85 00:05:26,160 --> 00:05:29,880 Speaker 1: its history. So for decades, the Beatle had been the 86 00:05:29,920 --> 00:05:34,840 Speaker 1: primary product from Volkswagen. While Volkswagen was finally retiring the 87 00:05:34,839 --> 00:05:39,280 Speaker 1: Beatle in this time, it was essentially doing the same thing. 88 00:05:39,360 --> 00:05:42,960 Speaker 1: It was following the same play with a different sensible car, 89 00:05:43,040 --> 00:05:45,960 Speaker 1: which would be the Golf. It's not incorrect to say 90 00:05:45,960 --> 00:05:49,320 Speaker 1: the Golf was intended for the same type of consumer 91 00:05:49,360 --> 00:05:52,960 Speaker 1: who previously would have purchased a Beatle, but Han recognized 92 00:05:53,000 --> 00:05:55,680 Speaker 1: that the strategy alone would not be enough to sustain 93 00:05:55,720 --> 00:05:58,800 Speaker 1: the company, and in fact, it was depending too heavily 94 00:05:58,839 --> 00:06:01,200 Speaker 1: upon any one veha a model is a recipe for 95 00:06:01,240 --> 00:06:05,119 Speaker 1: potential disaster if markets should change. With that in mind, 96 00:06:05,480 --> 00:06:08,760 Speaker 1: Han gave more freedom to the Audi division. Now, this 97 00:06:08,839 --> 00:06:11,320 Speaker 1: really isn't an episode about Aldi, so I don't want 98 00:06:11,320 --> 00:06:14,640 Speaker 1: to get too far off track here, but it would 99 00:06:14,680 --> 00:06:17,039 Speaker 1: mean that the Audi brand was given a bit more 100 00:06:17,120 --> 00:06:20,320 Speaker 1: slack to develop cars for a higher end market than 101 00:06:20,440 --> 00:06:24,559 Speaker 1: Volkswagen's Golf catered to. And it would give Audi the 102 00:06:24,560 --> 00:06:31,279 Speaker 1: the the freedom to start experimenting more and uh really 103 00:06:31,720 --> 00:06:34,440 Speaker 1: branching out from what it had been doing. Breaking free 104 00:06:35,040 --> 00:06:37,560 Speaker 1: of a perception that Audi was a brand that made 105 00:06:37,560 --> 00:06:40,800 Speaker 1: cars that old people liked. It was able to get 106 00:06:40,880 --> 00:06:43,640 Speaker 1: past that an Audi for the most part, operated as 107 00:06:43,680 --> 00:06:48,920 Speaker 1: an independent division within Volkswagen. Around this time forward, one 108 00:06:49,080 --> 00:06:52,120 Speaker 1: enormous political event that would hit close to home for 109 00:06:52,320 --> 00:06:56,799 Speaker 1: doctor Han quite literally was the reunification of Germany. Towards 110 00:06:56,839 --> 00:06:59,080 Speaker 1: the end of the nineteen eighties, it became clear that 111 00:06:59,120 --> 00:07:03,000 Speaker 1: the Soviet Union days were numbered, and that entire story 112 00:07:03,120 --> 00:07:06,680 Speaker 1: is far too big to fit into an episode about Volkswagen. 113 00:07:07,080 --> 00:07:10,440 Speaker 1: But one of the many consequences of the Soviet Union's 114 00:07:10,480 --> 00:07:15,200 Speaker 1: collapse was that East and West Germany would reunite into 115 00:07:15,240 --> 00:07:18,520 Speaker 1: a whole nation. Now, this was when the Berlin Wall, 116 00:07:18,600 --> 00:07:22,960 Speaker 1: which once stood as a symbol of oppression and authoritarianism 117 00:07:23,040 --> 00:07:26,800 Speaker 1: was pulled down to the ground. For Volkswagen, it would 118 00:07:26,800 --> 00:07:30,360 Speaker 1: mean the opportunity to establish new manufacturing facilities and what 119 00:07:30,520 --> 00:07:35,480 Speaker 1: had previously been Soviet controlled territory. As for dr Han, 120 00:07:35,920 --> 00:07:38,520 Speaker 1: the meaning was much more personal. He had grown up 121 00:07:38,520 --> 00:07:43,240 Speaker 1: in Chimnets, which is in eastern Germany. After World War Two, 122 00:07:43,520 --> 00:07:46,880 Speaker 1: his family left the region as that region was falling 123 00:07:46,920 --> 00:07:50,320 Speaker 1: to Soviet control. In fact, Dr hans father was one 124 00:07:50,360 --> 00:07:53,840 Speaker 1: of the founders of Auto Union, which would later evolve 125 00:07:53,880 --> 00:07:57,080 Speaker 1: into AUDI. So for Dr Han this was more than 126 00:07:57,200 --> 00:08:01,280 Speaker 1: just Volkswagen growing its production facilities. It was coming back 127 00:08:01,360 --> 00:08:04,800 Speaker 1: to a part of Germany that hadn't been you know, 128 00:08:05,400 --> 00:08:09,040 Speaker 1: approachable for years. It had been behind Soviet control, behind 129 00:08:09,040 --> 00:08:13,400 Speaker 1: the Iron Curtain. Part of hans reasoning, in fact, a 130 00:08:13,480 --> 00:08:15,760 Speaker 1: large part of it when it came to opening up 131 00:08:15,800 --> 00:08:19,640 Speaker 1: manufacturing facilities, was that relying upon a centralized production model 132 00:08:20,040 --> 00:08:23,520 Speaker 1: wasn't necessarily efficient or cost effective. He wanted to build 133 00:08:23,520 --> 00:08:27,280 Speaker 1: more plants in various regions so that the production facilities 134 00:08:27,440 --> 00:08:29,520 Speaker 1: weren't that far away from the people who were actually 135 00:08:29,560 --> 00:08:32,360 Speaker 1: buying the cars. That really cut down costs. If you're 136 00:08:32,360 --> 00:08:35,120 Speaker 1: building the stuff near where the people who want the 137 00:08:35,160 --> 00:08:39,880 Speaker 1: stuff can get the stuff, then you're cutting down costs significantly. 138 00:08:40,160 --> 00:08:43,120 Speaker 1: So he was looking ahead to a more unified Europe 139 00:08:43,160 --> 00:08:45,280 Speaker 1: and he wanted to build a car company capable of 140 00:08:45,320 --> 00:08:50,040 Speaker 1: flourishing in that environment. At the same time, expanding operations 141 00:08:50,480 --> 00:08:54,160 Speaker 1: costs a lot of money, and Volkswagen was spending a 142 00:08:54,240 --> 00:08:58,679 Speaker 1: ton to build out these manufacturing facilities. Moreover, Han felt 143 00:08:58,720 --> 00:09:00,840 Speaker 1: that the European market would serve as sort of the 144 00:09:00,880 --> 00:09:04,560 Speaker 1: foundation for the rest of Volkswagen's businesses around the world, 145 00:09:04,920 --> 00:09:08,079 Speaker 1: so most of his focus was on developing the European 146 00:09:08,120 --> 00:09:12,280 Speaker 1: market and investing in that market, which meant Volkswagen's presence 147 00:09:12,320 --> 00:09:15,200 Speaker 1: in other parts of the world, notably in North America 148 00:09:15,240 --> 00:09:18,520 Speaker 1: and the United States, really began to fade quite a bit. 149 00:09:18,880 --> 00:09:21,559 Speaker 1: Fans of Volkswagen in the US felt like they were 150 00:09:21,559 --> 00:09:24,960 Speaker 1: being neglected, something that stung more than a little bit 151 00:09:25,080 --> 00:09:27,600 Speaker 1: considering the fact that Dr Han had once been the 152 00:09:27,640 --> 00:09:31,959 Speaker 1: head of the American division of Volkswagen. The popularity of 153 00:09:32,040 --> 00:09:35,360 Speaker 1: Volkswagen in America had been on shaky ground since nine 154 00:09:36,559 --> 00:09:39,439 Speaker 1: when sales figures dipped from year to year. It went 155 00:09:39,440 --> 00:09:43,400 Speaker 1: down from nineteen one. Now the numbers fluctuated a bit 156 00:09:43,440 --> 00:09:46,000 Speaker 1: over the next several years. Sometimes they would go down 157 00:09:46,040 --> 00:09:48,160 Speaker 1: quite a bit, sometimes they would rebound a little bit. 158 00:09:48,480 --> 00:09:51,400 Speaker 1: But the general trend from nineteen eighty one all the 159 00:09:51,400 --> 00:09:55,800 Speaker 1: way to nineteen nine three was to see declines in sales. 160 00:09:56,280 --> 00:09:58,679 Speaker 1: And I'm sure most of you know that's the opposite 161 00:09:58,679 --> 00:10:00,680 Speaker 1: of what you want to see in a sales chart. 162 00:10:01,160 --> 00:10:03,360 Speaker 1: And when I say a decline, I mean there was 163 00:10:03,400 --> 00:10:06,280 Speaker 1: a really big drop off. So back in nineteen eighty 164 00:10:06,480 --> 00:10:10,600 Speaker 1: Volkswagen sold around three hundred thirty eight thousand vehicles in 165 00:10:10,640 --> 00:10:15,120 Speaker 1: the US market. In that number dropped down to fewer 166 00:10:15,160 --> 00:10:19,240 Speaker 1: than fifty thousand vehicles. So three d thirty eight thousand 167 00:10:19,320 --> 00:10:24,560 Speaker 1: down to less than fifty thousand. That's catastrophic. So what 168 00:10:24,760 --> 00:10:27,760 Speaker 1: caused that number to drop down so low in the 169 00:10:27,840 --> 00:10:31,559 Speaker 1: United States? Well, one reason was that the general consensus 170 00:10:32,280 --> 00:10:35,840 Speaker 1: was that the cars coming out of the American manufacturing 171 00:10:35,920 --> 00:10:39,680 Speaker 1: plant were substandard, and another was that the cars coming 172 00:10:39,679 --> 00:10:44,360 Speaker 1: out of Mexico were similarly unreliable, and the Puebla manufacturing 173 00:10:44,360 --> 00:10:47,800 Speaker 1: facility in Mexico was experiencing a ton of different problems. 174 00:10:48,280 --> 00:10:52,040 Speaker 1: So it wasn't until nineteen when Volkswagen introduced the third 175 00:10:52,080 --> 00:10:54,679 Speaker 1: generation of the Goulf and the third generation of the 176 00:10:54,760 --> 00:10:58,240 Speaker 1: Jetta models in the US that sales began to recover. 177 00:10:58,800 --> 00:11:03,679 Speaker 1: The American market was fiercely competitive at that time. Japanese 178 00:11:03,720 --> 00:11:06,960 Speaker 1: automakers were really filling in the void that had been 179 00:11:07,040 --> 00:11:10,880 Speaker 1: left by Volkswagen, and the Japanese companies were offering cars 180 00:11:10,920 --> 00:11:14,600 Speaker 1: that aimed at customers who were looking for reliable, inexpensive vehicles. 181 00:11:15,000 --> 00:11:17,319 Speaker 1: So in the nineteen seventies, if you were talking about 182 00:11:17,440 --> 00:11:21,360 Speaker 1: an auto import in the United States, you were probably 183 00:11:21,400 --> 00:11:25,640 Speaker 1: talking about Volkswagen. But by the mid eighties that had changed. 184 00:11:25,880 --> 00:11:27,840 Speaker 1: If you were talking about an import, you were probably 185 00:11:27,880 --> 00:11:31,600 Speaker 1: talking about Japanese car. And Dr Han didn't seem too 186 00:11:31,640 --> 00:11:34,880 Speaker 1: concerned about reversing that trend, as he was focused more 187 00:11:34,960 --> 00:11:37,800 Speaker 1: on the European market at the time. Now that's not 188 00:11:37,840 --> 00:11:41,320 Speaker 1: to say Volkswagen wasn't introducing new vehicles during Dr hans 189 00:11:41,360 --> 00:11:44,880 Speaker 1: time as CEO. The company produced new models like the 190 00:11:44,960 --> 00:11:50,120 Speaker 1: Volkswagen Santana also known as the Quantum, which evolved from 191 00:11:50,200 --> 00:11:53,720 Speaker 1: the Volkswagen Pasat. Volkswagen also made a few cars for 192 00:11:53,880 --> 00:11:57,160 Speaker 1: various regional markets like Brazil or Eastern Europe, and these 193 00:11:57,200 --> 00:12:01,280 Speaker 1: were very much peculiar to those agents. So if you 194 00:12:01,320 --> 00:12:03,880 Speaker 1: weren't from there, you were not likely to see one 195 00:12:03,920 --> 00:12:08,959 Speaker 1: of these types of Volkswagen's. In Volkswagen launched an ad 196 00:12:09,000 --> 00:12:12,000 Speaker 1: campaign in the United States that I still remember quite well. 197 00:12:12,240 --> 00:12:16,040 Speaker 1: The company introduced a new word to Planet Earth. That 198 00:12:16,160 --> 00:12:20,360 Speaker 1: new word was far fig nugan. This was technically a 199 00:12:20,400 --> 00:12:24,120 Speaker 1: brand new word made up of two existing German words. 200 00:12:24,600 --> 00:12:28,480 Speaker 1: You had fatherin, meaning to drive, and very NuGen, which 201 00:12:28,559 --> 00:12:32,000 Speaker 1: means enjoyment. So this was supposed to be about the 202 00:12:32,120 --> 00:12:37,240 Speaker 1: enjoyment of driving driving enjoyment varvig NuGen. This was not 203 00:12:37,280 --> 00:12:40,920 Speaker 1: an existing German word, rather one that was invented for 204 00:12:41,000 --> 00:12:43,440 Speaker 1: the ad campaign. However, I will say that the German 205 00:12:43,520 --> 00:12:47,679 Speaker 1: language frequently strings together multiple words to create a new word, 206 00:12:48,160 --> 00:12:51,959 Speaker 1: rather than just inventing a sensible short word to handle things. 207 00:12:52,320 --> 00:12:54,720 Speaker 1: That's why you will occasionally run into German words that 208 00:12:54,760 --> 00:12:58,360 Speaker 1: are incredibly long, because they've just strung together a bunch 209 00:12:58,440 --> 00:13:02,640 Speaker 1: of pre existing words to describe something new. Now, despite 210 00:13:02,679 --> 00:13:05,360 Speaker 1: the ad campaign, the general feeling in the US was 211 00:13:05,440 --> 00:13:08,720 Speaker 1: that Volkswagen was just focused on other markets and not 212 00:13:08,960 --> 00:13:15,000 Speaker 1: in North America. In Dr Han retired as CEO, and remember, 213 00:13:15,400 --> 00:13:18,040 Speaker 1: the worst year for North American sales would follow in 214 00:13:20,080 --> 00:13:23,319 Speaker 1: partly because Dr Hans strategy hadn't really supported the North 215 00:13:23,360 --> 00:13:26,480 Speaker 1: American market. The new head of the company would be 216 00:13:26,520 --> 00:13:30,560 Speaker 1: a man named Ferdinand Psh. And by the way, I know, 217 00:13:30,720 --> 00:13:34,760 Speaker 1: I butchered the pronunciation of Psh in a previous episode 218 00:13:34,800 --> 00:13:39,000 Speaker 1: when I talked about this family. But Ferdinand Psh had 219 00:13:39,000 --> 00:13:43,640 Speaker 1: previously helmed the Audi division under Volkswagen Group, and beyond that, 220 00:13:43,920 --> 00:13:47,920 Speaker 1: he traced his lineage back to the very founding of Volkswagen. 221 00:13:48,440 --> 00:13:55,080 Speaker 1: His grandfather was Ferdinand Porsche himself. His father was Anton Psh, 222 00:13:55,120 --> 00:14:02,800 Speaker 1: who married Ferdinand Porsche's daughter Louise headvig Annie Villehelmina Portschah. 223 00:14:03,160 --> 00:14:05,320 Speaker 1: What a name. And so if you listen to my 224 00:14:05,320 --> 00:14:08,360 Speaker 1: first episode in this series, you know that Anton Psh 225 00:14:08,440 --> 00:14:11,920 Speaker 1: had been the director of Volkswagen during World War Two. 226 00:14:12,400 --> 00:14:15,720 Speaker 1: That meant he was overseeing operations back when Volkswagen was 227 00:14:15,800 --> 00:14:20,160 Speaker 1: dependent upon forced labor, and reportedly he ran off with 228 00:14:20,200 --> 00:14:25,840 Speaker 1: a significant amount of money from Volkswagen while fleeing Allied forces. 229 00:14:25,880 --> 00:14:30,280 Speaker 1: In he would get arrested by French authorities along with 230 00:14:30,280 --> 00:14:32,720 Speaker 1: Ferdinand Porsche and spent a couple of years in jail 231 00:14:32,760 --> 00:14:37,360 Speaker 1: before finally being released. Well, Ferdinand pH had previously worked 232 00:14:37,480 --> 00:14:41,560 Speaker 1: at Porsche mainly in efforts to build high performance racing cars, 233 00:14:41,920 --> 00:14:44,560 Speaker 1: with the primary goal of building a vehicle that could 234 00:14:44,600 --> 00:14:48,440 Speaker 1: win the Laman's endurance race. This type of race is 235 00:14:48,520 --> 00:14:51,720 Speaker 1: different from those that are all about the first vehicle 236 00:14:51,760 --> 00:14:53,760 Speaker 1: to cross the finish line after a given number of 237 00:14:53,840 --> 00:14:57,920 Speaker 1: laps or distance. Instead, the winning vehicle at Lament's is 238 00:14:58,000 --> 00:15:01,480 Speaker 1: the one that has covered the most distance in a 239 00:15:01,600 --> 00:15:05,200 Speaker 1: twenty four hour period, So whichever car has gone the 240 00:15:05,280 --> 00:15:11,440 Speaker 1: furthest within twenty four hours across a predetermined route. Porsche 241 00:15:11,600 --> 00:15:15,800 Speaker 1: had been entering versions of its Porsche nine seventeen for 242 00:15:15,960 --> 00:15:19,480 Speaker 1: twenty five years before a Porsche driver took home the 243 00:15:19,520 --> 00:15:23,280 Speaker 1: top prize. Ferdinand had achieved his goal of engineering a 244 00:15:23,320 --> 00:15:27,520 Speaker 1: winning race car at great expense. In fact, it was 245 00:15:27,560 --> 00:15:32,200 Speaker 1: such an expensive endeavor that it nearly bankrupted Porsche. In 246 00:15:32,320 --> 00:15:37,600 Speaker 1: nineteen two, Ferdinand Psh would transition from Porsche to go 247 00:15:37,760 --> 00:15:42,200 Speaker 1: work at Audi. Now this wasn't necessarily by choice. Pasha's 248 00:15:42,520 --> 00:15:46,760 Speaker 1: obsession with creating faster racing cars had almost brought down 249 00:15:46,760 --> 00:15:50,920 Speaker 1: the company, and ownership of the company fell to two families, 250 00:15:50,960 --> 00:15:54,000 Speaker 1: the Porsche family and the pH family, and both of 251 00:15:54,000 --> 00:15:58,240 Speaker 1: those families trace their history back to the founder Ferdinand Porsche. 252 00:15:58,680 --> 00:16:03,440 Speaker 1: Both of them owned about fifty of the company Porsche, 253 00:16:03,840 --> 00:16:06,520 Speaker 1: and the two sides were beginning to fight with each other, 254 00:16:07,120 --> 00:16:09,880 Speaker 1: and I swear going through the stories makes it seem 255 00:16:09,920 --> 00:16:12,240 Speaker 1: like it's a season of Game of Thrones. We'll learn 256 00:16:12,240 --> 00:16:15,040 Speaker 1: more about that later in this episode. So in order 257 00:16:15,080 --> 00:16:18,360 Speaker 1: to prevent this rivalry from tearing the company to pieces, 258 00:16:18,840 --> 00:16:22,680 Speaker 1: the two families agreed that no one from either side 259 00:16:22,760 --> 00:16:26,200 Speaker 1: should be involved in the day to day operations of Porsche. 260 00:16:26,960 --> 00:16:31,440 Speaker 1: So that's why PSH would leave Porsche the car company Porsche, 261 00:16:31,680 --> 00:16:37,000 Speaker 1: not the holding company for Audi. Ferdinand. PSH would Transformality 262 00:16:37,040 --> 00:16:39,000 Speaker 1: from that brand that was being viewed as a bit 263 00:16:39,040 --> 00:16:41,880 Speaker 1: old fashioned in catering to the elderly into more of 264 00:16:41,920 --> 00:16:45,720 Speaker 1: a luxury sedan brand, and so it brought Audi into 265 00:16:45,880 --> 00:16:51,120 Speaker 1: competition against vehicle makers like BMW or Mercedes. But PSH 266 00:16:51,240 --> 00:16:55,640 Speaker 1: had grander designs. He wanted to head up Volkswagen itself. 267 00:16:56,400 --> 00:16:58,480 Speaker 1: I'll have more to say about him in just a second, 268 00:16:58,560 --> 00:17:03,280 Speaker 1: but first, there are tons of VPN providers out there, 269 00:17:03,400 --> 00:17:05,639 Speaker 1: and you've probably heard of a couple of them, and 270 00:17:05,720 --> 00:17:07,919 Speaker 1: some of you may have even used a VPN before. 271 00:17:08,200 --> 00:17:10,720 Speaker 1: But I like to do research on my sponsors, and 272 00:17:10,720 --> 00:17:13,159 Speaker 1: I only recommend brands to my listeners that I believe 273 00:17:13,200 --> 00:17:15,400 Speaker 1: in and that I use myself. And I can say 274 00:17:15,400 --> 00:17:18,720 Speaker 1: with full confidence that Express vpn is the best VPN 275 00:17:18,760 --> 00:17:22,040 Speaker 1: on the market. And here's why. 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There's betrayal, 302 00:19:01,480 --> 00:19:06,600 Speaker 1: there's shifty maneuvering, there's backstabbing, their extramarital affairs. I mean, 303 00:19:06,640 --> 00:19:09,720 Speaker 1: if you look at the Porstcha and PSH families from 304 00:19:09,720 --> 00:19:13,400 Speaker 1: the nineteen seventies to the two thousands and a little 305 00:19:13,440 --> 00:19:15,960 Speaker 1: bit beyond, it sounds like the stuff out of a 306 00:19:16,040 --> 00:19:20,200 Speaker 1: soap opera, like Dynasty or Dallas. It's crazy. On top 307 00:19:20,240 --> 00:19:23,560 Speaker 1: of that, we enter into a bizarre corporate structure in 308 00:19:23,600 --> 00:19:26,679 Speaker 1: which different companies gain a stake in each other, and 309 00:19:26,680 --> 00:19:28,879 Speaker 1: in some cases it looks to me like the whole 310 00:19:28,920 --> 00:19:32,040 Speaker 1: thing is oura borus. You know, the snake eating its 311 00:19:32,080 --> 00:19:34,479 Speaker 1: own tail. And I'll do my best a little bit 312 00:19:34,560 --> 00:19:37,040 Speaker 1: later in this episode to try and work out how 313 00:19:37,160 --> 00:19:40,720 Speaker 1: that actually ends up being structured. For no other reason 314 00:19:40,760 --> 00:19:43,680 Speaker 1: that to illustrate how the ownership of these companies is 315 00:19:43,720 --> 00:19:48,280 Speaker 1: incredibly complicated and at least to me somewhat ikey. In 316 00:19:48,320 --> 00:19:51,400 Speaker 1: the meantime, we've got other stuff to touch on now. 317 00:19:51,440 --> 00:19:53,960 Speaker 1: While I'll have lots of critical things to say about 318 00:19:54,000 --> 00:19:57,600 Speaker 1: pH one thing that's clear is that his ambition pushed 319 00:19:57,680 --> 00:20:03,879 Speaker 1: Volkswagen to new heights. He was reportedly a very hard 320 00:20:04,440 --> 00:20:09,960 Speaker 1: boss to work for, Like he was incredibly demanding and ruthless. Uh. 321 00:20:10,000 --> 00:20:13,119 Speaker 1: He was quick to throw you aside if he didn't 322 00:20:13,200 --> 00:20:16,560 Speaker 1: think you were useful. And there are a lot of 323 00:20:16,560 --> 00:20:19,359 Speaker 1: other negative things I could say. But in nine the 324 00:20:19,440 --> 00:20:23,160 Speaker 1: company would introduce the new Beatle and that would become 325 00:20:23,160 --> 00:20:25,520 Speaker 1: available for purchase in the United States the following year, 326 00:20:25,840 --> 00:20:28,359 Speaker 1: and that showed that they were now paying attention to 327 00:20:28,440 --> 00:20:32,120 Speaker 1: the North American market again and no longer keeping such 328 00:20:32,160 --> 00:20:35,560 Speaker 1: a laser focus just on Europe. This was a combat 329 00:20:35,560 --> 00:20:38,359 Speaker 1: car that was inspired by the original Beetle, but it 330 00:20:38,520 --> 00:20:43,600 Speaker 1: featured sleeker lines, front mounted inline four cylinder engine. If 331 00:20:43,640 --> 00:20:45,480 Speaker 1: you listen to the first part of the series you 332 00:20:45,560 --> 00:20:48,680 Speaker 1: remember that the original Volkswagen Beetle was an air cooled 333 00:20:48,800 --> 00:20:52,120 Speaker 1: rear mounted engine, so it was very different from that, 334 00:20:52,760 --> 00:20:56,000 Speaker 1: and Motor Trends would actually name it the import car 335 00:20:56,080 --> 00:21:00,560 Speaker 1: of the Year in nineteen Despite its small size, it 336 00:21:00,640 --> 00:21:03,399 Speaker 1: really wasn't the most efficient vehicle on the road. It 337 00:21:03,520 --> 00:21:06,240 Speaker 1: averaged twenty one miles per gallon. You would have thought 338 00:21:06,240 --> 00:21:09,199 Speaker 1: that perhaps it would have been a little better about that, 339 00:21:09,240 --> 00:21:13,080 Speaker 1: but no. Well, the new Beatle, along with an updated 340 00:21:13,160 --> 00:21:17,840 Speaker 1: Passat and a new Jetta model all helped revitalized Volkswagen 341 00:21:17,920 --> 00:21:21,080 Speaker 1: sales in North America after that market had been largely 342 00:21:21,119 --> 00:21:24,520 Speaker 1: forgotten about for more than a decade. Meanwhile, on the 343 00:21:24,560 --> 00:21:27,840 Speaker 1: corporate side of things, pH was leading some pretty serious 344 00:21:27,840 --> 00:21:32,280 Speaker 1: efforts to really expand Volkswagen's assets. One of the big 345 00:21:32,320 --> 00:21:36,560 Speaker 1: acquisitions at this time was Bentley Motors, the company that 346 00:21:36,560 --> 00:21:38,760 Speaker 1: had gone through a couple of changes in ownership, having 347 00:21:38,800 --> 00:21:42,560 Speaker 1: been part of Rolls Royce for nearly forty years before 348 00:21:42,680 --> 00:21:46,879 Speaker 1: a company called Vickers Plc purchased the Rolls Royce Motor 349 00:21:46,920 --> 00:21:51,400 Speaker 1: division in nineteen seventy. Twenty eight years after that, PSH 350 00:21:51,520 --> 00:21:54,480 Speaker 1: and Volkswagen came calling with an offer to purchase the 351 00:21:54,560 --> 00:21:58,600 Speaker 1: Bentley brand. Though Volkswagen would not acquire ownership of the 352 00:21:58,680 --> 00:22:01,399 Speaker 1: Rolls Royce logo or name, they did get hold of 353 00:22:01,440 --> 00:22:04,000 Speaker 1: the designs. They could use the car designs, but they 354 00:22:04,040 --> 00:22:08,719 Speaker 1: could not use the logo or name of Rolls Royce Bentley's. 355 00:22:09,119 --> 00:22:13,640 Speaker 1: In case you don't know, our luxury cars like as 356 00:22:13,760 --> 00:22:18,320 Speaker 1: luxury as luxury gets really crafts. People hand make many 357 00:22:18,480 --> 00:22:21,199 Speaker 1: of the details on the vehicles like you'll get like 358 00:22:21,320 --> 00:22:26,080 Speaker 1: hand carved dashboards, for example. So the manufacturing process is 359 00:22:26,119 --> 00:22:29,280 Speaker 1: guided by a human touch nearly every step of the way. 360 00:22:29,320 --> 00:22:34,199 Speaker 1: It is slow and methodical, and these are extremely expensive 361 00:22:34,280 --> 00:22:38,000 Speaker 1: luxury cars. They're also extremely British. The cost of the 362 00:22:38,040 --> 00:22:43,000 Speaker 1: acquisition was four hundred thirty million pounds. But we're not 363 00:22:43,080 --> 00:22:48,200 Speaker 1: done with Volkswagen's purchases in n yet. The company also 364 00:22:48,240 --> 00:22:52,040 Speaker 1: acquired the rights to use the Bugatti brand name. Now, 365 00:22:52,040 --> 00:22:55,119 Speaker 1: Bugatti has its own odd past. In fact, at this 366 00:22:55,119 --> 00:22:57,320 Speaker 1: point I think it must come as a prerequisite for 367 00:22:57,359 --> 00:23:01,240 Speaker 1: car companies. It was founded in the early twentieth century 368 00:23:01,280 --> 00:23:05,959 Speaker 1: by a Torre Bugatti, who built many successful race cars 369 00:23:06,160 --> 00:23:09,240 Speaker 1: in the early nineteen hundreds, but after his death in 370 00:23:09,280 --> 00:23:11,960 Speaker 1: the nineteen forties, the company kind of lost focus, and 371 00:23:11,960 --> 00:23:15,520 Speaker 1: by the nineteen fifties it had pretty much faded from memory. 372 00:23:15,560 --> 00:23:19,760 Speaker 1: It wasn't really producing cars anymore. In nineteen seven, Romano 373 00:23:19,840 --> 00:23:23,760 Speaker 1: are totally an entrepreneur, acquired the rights to the Bugatti 374 00:23:23,800 --> 00:23:28,040 Speaker 1: brand and built new manufacturing facilities with the the intent 375 00:23:28,280 --> 00:23:32,480 Speaker 1: of making Bugatti a prestige brand again. The new Bugatti 376 00:23:32,520 --> 00:23:35,520 Speaker 1: company produced several cars, but a recession in the nineteen 377 00:23:35,600 --> 00:23:39,360 Speaker 1: nineties took a big chunk of the company's assets and 378 00:23:39,440 --> 00:23:44,240 Speaker 1: it was essentially a failed business by so three years 379 00:23:44,280 --> 00:23:48,600 Speaker 1: later in nine Volkswagen acquires the brand name Bugatti and 380 00:23:48,720 --> 00:23:51,879 Speaker 1: starts up production with new model designs. So today the 381 00:23:51,920 --> 00:23:55,439 Speaker 1: Bugatti brand is associated with super cars that come with 382 00:23:56,040 --> 00:23:59,880 Speaker 1: incredible high end price tags. And I think it's most 383 00:24:00,080 --> 00:24:03,159 Speaker 1: a testament to Pasha's interest in fast cars, Like he 384 00:24:03,720 --> 00:24:09,080 Speaker 1: clearly always had a fascination with building incredibly fast vehicles, 385 00:24:09,280 --> 00:24:11,840 Speaker 1: and Bugatti are the type of cars that look like 386 00:24:11,880 --> 00:24:15,120 Speaker 1: they're going fast even when they're sitting still. And I'm 387 00:24:15,119 --> 00:24:19,399 Speaker 1: still not done with their acquisitions. One other big brand 388 00:24:19,520 --> 00:24:24,360 Speaker 1: that Volkswagen acquired that year was Lamborghini. That was the 389 00:24:24,400 --> 00:24:27,960 Speaker 1: Italian luxury sports car company. It's now part of Volkswagen 390 00:24:28,200 --> 00:24:31,200 Speaker 1: It was founded in the nineteen sixties. Largely it was 391 00:24:31,280 --> 00:24:35,280 Speaker 1: intended to be a competitor to Ferrari and developing high 392 00:24:35,359 --> 00:24:39,040 Speaker 1: performance race cars. As I mentioned earlier, is really expensive. 393 00:24:39,080 --> 00:24:43,080 Speaker 1: I mean it nearly bankrupted Porscha. Well for Lamborghini, that 394 00:24:43,240 --> 00:24:45,000 Speaker 1: they were having the same sort of issues. They were 395 00:24:45,040 --> 00:24:47,800 Speaker 1: spending way more money than they were making, and then that, 396 00:24:47,920 --> 00:24:51,200 Speaker 1: paired with the oil crisis of the nineteen seventies, meant 397 00:24:51,240 --> 00:24:54,280 Speaker 1: that very few orders for these high end sports cars 398 00:24:54,280 --> 00:24:56,840 Speaker 1: were coming in. It led to a disastrous collapse of 399 00:24:56,840 --> 00:25:00,320 Speaker 1: the Lamborghini company and the company went bankrupt and eighteen 400 00:25:00,440 --> 00:25:04,440 Speaker 1: seventy eight. A few years later, brothers Patrick and Jean 401 00:25:04,480 --> 00:25:09,640 Speaker 1: Claude Memroun revived Lamborghini and it became a brand uh 402 00:25:09,840 --> 00:25:13,719 Speaker 1: a new in the nineteen eighties, um with with models 403 00:25:13,720 --> 00:25:15,800 Speaker 1: like the Kuntash, which I remember as a kid, I 404 00:25:15,840 --> 00:25:18,440 Speaker 1: thought was the most amazing looking car I've ever seen. 405 00:25:19,280 --> 00:25:22,760 Speaker 1: But then they ended up selling Lamborghini to the Chrysler Corporation. 406 00:25:23,200 --> 00:25:26,720 Speaker 1: In Chrysler would in turn sell Lamborghini off to a 407 00:25:26,760 --> 00:25:29,840 Speaker 1: Malaysian company, and it was from that company the Volkswagen 408 00:25:29,880 --> 00:25:33,160 Speaker 1: would acquire the rights to the Lamborghini name. And designs. Now, 409 00:25:33,200 --> 00:25:38,119 Speaker 1: technically Lamborghini falls under the AUDI division at Volkswagen, and 410 00:25:38,160 --> 00:25:41,399 Speaker 1: as I mentioned before, AUDI gets to operate more or 411 00:25:41,440 --> 00:25:44,879 Speaker 1: less independently from Volkswagen, but it belongs to Volkswagen Groups. 412 00:25:44,880 --> 00:25:47,240 Speaker 1: So Lamborghini is one of the brands under the Volkswagen 413 00:25:47,240 --> 00:25:50,480 Speaker 1: Group name. All right, let's skip ahead to two thousand two. 414 00:25:51,640 --> 00:25:55,440 Speaker 1: Volkswagen announced two new lines of vehicles that year. There 415 00:25:55,520 --> 00:25:58,760 Speaker 1: was the Phaeton line that was a luxury car brand, 416 00:25:58,840 --> 00:26:02,760 Speaker 1: and there was the Tourig line, which are SUVs. Now. 417 00:26:02,800 --> 00:26:05,720 Speaker 1: This was also the year that ferinand Psh would step 418 00:26:05,760 --> 00:26:08,439 Speaker 1: out of the role of CEO for Volkswagen and he 419 00:26:08,480 --> 00:26:12,600 Speaker 1: became the chairman of the board for Volkswagen Group for 420 00:26:12,640 --> 00:26:16,719 Speaker 1: their supervisory and steering committees. pH would continue to have 421 00:26:16,920 --> 00:26:21,320 Speaker 1: significant influence within the company. His successor as CEO was 422 00:26:21,359 --> 00:26:26,200 Speaker 1: an engineer named Burned Peter Pischets Reader and I'm sure 423 00:26:26,200 --> 00:26:28,080 Speaker 1: of butchered that last name, so we're just gonna call 424 00:26:28,160 --> 00:26:32,320 Speaker 1: him Burnt because it's a lot easier. In two thousand three, 425 00:26:32,600 --> 00:26:38,080 Speaker 1: the final Type one Beatle, the original Volkswagen vehicle model 426 00:26:38,320 --> 00:26:41,919 Speaker 1: that carried the company for decades, rolled off the manufacturing 427 00:26:41,960 --> 00:26:47,119 Speaker 1: facility in Pueblo, Mexico, and it was actually given a number. 428 00:26:47,119 --> 00:26:50,120 Speaker 1: It was number. It was car number twenty one million, 429 00:26:50,160 --> 00:26:54,800 Speaker 1: five thousand, four hundred sixty four. It was not sold 430 00:26:54,840 --> 00:26:58,400 Speaker 1: off to some lucky motorist. Instead, it was actually shipped 431 00:26:58,400 --> 00:27:03,920 Speaker 1: back to Volkswagen's headquarters in Volksburg, Germany, because, as Indiana 432 00:27:04,040 --> 00:27:09,399 Speaker 1: Jones would say, it belongs in a museum. Burnt would 433 00:27:09,440 --> 00:27:13,359 Speaker 1: only stay at CEO for just a few short years 434 00:27:13,800 --> 00:27:17,359 Speaker 1: before he was essentially forced to resign, and allegedly the 435 00:27:17,400 --> 00:27:20,400 Speaker 1: reason that he was forced to resign was because he 436 00:27:20,520 --> 00:27:24,720 Speaker 1: was frequently coming to disagreements with pH, who really wanted 437 00:27:24,760 --> 00:27:29,240 Speaker 1: to keep control of this company. Martin Winterkorn, who had 438 00:27:29,359 --> 00:27:32,040 Speaker 1: been the leader for the AUDI division, would then step 439 00:27:32,080 --> 00:27:36,080 Speaker 1: in to take over the role as CEO. That would 440 00:27:36,080 --> 00:27:39,280 Speaker 1: happen in January two seven, and winter Corn had been 441 00:27:39,320 --> 00:27:42,359 Speaker 1: a pH protege though that would be put to the 442 00:27:42,400 --> 00:27:46,440 Speaker 1: test in a big, big way. So at first pH thought, 443 00:27:46,440 --> 00:27:50,280 Speaker 1: oh yeah, now I've got my guy in this space, 444 00:27:50,320 --> 00:27:54,920 Speaker 1: even though the pH had handpicked Burnt earlier. So um, 445 00:27:54,960 --> 00:27:57,000 Speaker 1: the fact that he kept getting burned by people that 446 00:27:57,040 --> 00:27:59,879 Speaker 1: he picked might say more about his management style, I guess. 447 00:28:00,320 --> 00:28:03,200 Speaker 1: In two thousand and eight, Volkswagen announced plans to build 448 00:28:03,240 --> 00:28:07,760 Speaker 1: an assembly plant in Chattanooga, Tennessee, a billion dollar assembly plant. 449 00:28:08,359 --> 00:28:11,400 Speaker 1: It would be finished by two thousand eleven. And this 450 00:28:11,480 --> 00:28:13,919 Speaker 1: was the goal of producing cars for the American market, 451 00:28:14,000 --> 00:28:18,520 Speaker 1: you know, within the market itself again, to augment Volkswagen's 452 00:28:18,520 --> 00:28:23,520 Speaker 1: production facilities and reduce the cost of getting cars to Americans. 453 00:28:24,040 --> 00:28:25,879 Speaker 1: That was also the year when we would see a 454 00:28:25,960 --> 00:28:29,320 Speaker 1: game of thrones like struggle really heat up. So let 455 00:28:29,320 --> 00:28:31,360 Speaker 1: me see if I can sort all of this out. 456 00:28:31,960 --> 00:28:34,800 Speaker 1: This is also gonna mean sticking with this particular story 457 00:28:34,800 --> 00:28:36,920 Speaker 1: and skipping some other stuff in the timeline for now, 458 00:28:37,320 --> 00:28:39,480 Speaker 1: but I want to try and work my way through 459 00:28:39,520 --> 00:28:43,880 Speaker 1: this whole sordid affair, alright. So this is really the 460 00:28:43,920 --> 00:28:48,880 Speaker 1: story of two companies, Volkswagen Group and Porsche se which 461 00:28:48,920 --> 00:28:51,440 Speaker 1: is a holding company. And it's also the story of 462 00:28:51,480 --> 00:28:55,520 Speaker 1: two families, the Porsche family and the related pH family, 463 00:28:55,560 --> 00:28:58,960 Speaker 1: their cousins to each other, and both of these trace 464 00:28:59,080 --> 00:29:03,200 Speaker 1: their lineage to Ferdinand Porsche, the founder of both Porsche 465 00:29:03,440 --> 00:29:07,280 Speaker 1: the auto company and Volkswagen the auto company. And it's 466 00:29:07,320 --> 00:29:10,400 Speaker 1: also about a lot of complex corporate maneuvers that frankly, 467 00:29:10,440 --> 00:29:13,800 Speaker 1: I don't fully understand, because tech is easy, but corporate 468 00:29:13,800 --> 00:29:19,280 Speaker 1: structures are really hard. Okay, So the Porsche pH families 469 00:29:19,520 --> 00:29:24,560 Speaker 1: own a holding company called Porsche s E. And now, typically, 470 00:29:24,560 --> 00:29:27,480 Speaker 1: a holding company's purpose is to create a central point 471 00:29:27,480 --> 00:29:33,280 Speaker 1: of control for multiple distinct businesses while simultaneously isolating those 472 00:29:33,320 --> 00:29:37,200 Speaker 1: businesses enough so that if one should fail or falter, 473 00:29:37,320 --> 00:29:39,840 Speaker 1: it doesn't drag the others down with it. So it's 474 00:29:39,840 --> 00:29:42,800 Speaker 1: a way to limit liability in other words, And each 475 00:29:42,840 --> 00:29:46,840 Speaker 1: business under a holding company performs as its own distinct business, 476 00:29:47,120 --> 00:29:49,720 Speaker 1: though it ultimately is under the umbrella of the parent 477 00:29:49,840 --> 00:29:54,600 Speaker 1: holding company. The holding company holds assets and equity, but 478 00:29:54,680 --> 00:29:57,280 Speaker 1: doesn't get involved in the day to day operations of 479 00:29:57,320 --> 00:29:59,239 Speaker 1: the business it holds, so you can think of it 480 00:29:59,280 --> 00:30:03,560 Speaker 1: as the business owners but not the business operators. At 481 00:30:03,600 --> 00:30:06,239 Speaker 1: least that's how it usually goes. So let's lay out 482 00:30:06,280 --> 00:30:10,920 Speaker 1: the arrangement here. So Anton Psh and Ferdinand Porsche first 483 00:30:11,080 --> 00:30:15,920 Speaker 1: founded the company that would evolve into portscha Se way 484 00:30:15,960 --> 00:30:18,840 Speaker 1: back in the nineteen thirties, and this is that holding 485 00:30:18,840 --> 00:30:23,920 Speaker 1: company that oversees assets. Essentially, this company holds the assets 486 00:30:23,960 --> 00:30:27,960 Speaker 1: of the Porsche and Psh families. It it funnels all 487 00:30:28,000 --> 00:30:30,640 Speaker 1: of the shares that all the different members of these 488 00:30:30,680 --> 00:30:36,640 Speaker 1: families have and represents their ownership of Porsche um. Different 489 00:30:36,640 --> 00:30:41,040 Speaker 1: members of the family, oh own different numbers of shares, 490 00:30:41,240 --> 00:30:45,240 Speaker 1: so like one person in Porsche family might own twice 491 00:30:45,240 --> 00:30:47,440 Speaker 1: as many shares as most of the other members of 492 00:30:47,440 --> 00:30:52,000 Speaker 1: the families. So just imagine a really big family of 493 00:30:52,040 --> 00:30:55,160 Speaker 1: people who don't really get along all that well with 494 00:30:55,200 --> 00:30:59,479 Speaker 1: one another, and they all own some part of this 495 00:30:59,600 --> 00:31:04,760 Speaker 1: holding company. Okay, so Porsche SE in turn owns the 496 00:31:04,840 --> 00:31:10,960 Speaker 1: family interest in another holding company called Porsche Vision Holding. 497 00:31:12,400 --> 00:31:20,120 Speaker 1: I oh, you Germans Vision Holding essentially means intermediate holding company, 498 00:31:20,160 --> 00:31:22,800 Speaker 1: which I mean that tracks right like it's a holding 499 00:31:22,840 --> 00:31:26,240 Speaker 1: company that's owned by a different holding company. Now, to 500 00:31:26,280 --> 00:31:29,640 Speaker 1: be fair, it's a little more complicated than even that. 501 00:31:29,680 --> 00:31:31,800 Speaker 1: This is starting to turn into like a Russian nesting 502 00:31:31,840 --> 00:31:36,480 Speaker 1: doll situation here. But the Porsche pH families own fifty 503 00:31:36,680 --> 00:31:41,960 Speaker 1: point one percent of this intermediary holding company. So you 504 00:31:41,960 --> 00:31:45,160 Speaker 1: can think of Porsche SE as the organization that holds 505 00:31:45,240 --> 00:31:50,719 Speaker 1: the assets that in turn represent controlling interest in another 506 00:31:50,800 --> 00:31:55,600 Speaker 1: holding company. But it's this intermediary holding company that owns 507 00:31:55,960 --> 00:32:00,400 Speaker 1: one hundred percent of Porsche Automobile Group that that's the 508 00:32:00,400 --> 00:32:04,680 Speaker 1: actual car manufacturing company that's responsible for building and selling 509 00:32:04,720 --> 00:32:09,160 Speaker 1: Porsche vehicles. So you know, Porsche se which represents the 510 00:32:09,560 --> 00:32:15,680 Speaker 1: family Porsche pH interest in Porsche's Vision Holding and that 511 00:32:15,760 --> 00:32:21,040 Speaker 1: in turn owns Porsche Automobile Group, got it because I 512 00:32:21,080 --> 00:32:25,840 Speaker 1: don't now Porsche had as in the car company had 513 00:32:25,880 --> 00:32:29,240 Speaker 1: a long history of being involved with Volkswagen's operations since 514 00:32:29,280 --> 00:32:33,600 Speaker 1: the very beginning, and the holding company had a five 515 00:32:33,600 --> 00:32:36,880 Speaker 1: percent stake in Volkswagen up until two thousand five, So 516 00:32:37,280 --> 00:32:41,440 Speaker 1: the Porsche Holding Company also owned some ownership in Volkswagen, 517 00:32:41,480 --> 00:32:44,680 Speaker 1: a small amount five percent, But in two thousand five 518 00:32:45,160 --> 00:32:49,160 Speaker 1: Porsche acquired more shares in Volkswagen and increased the ownership 519 00:32:49,240 --> 00:32:53,640 Speaker 1: to twenty percent. So now the Porsche Holding Company owns 520 00:32:53,760 --> 00:32:57,480 Speaker 1: one fifth of Volkswagen. For a while, it looked like 521 00:32:57,520 --> 00:33:00,640 Speaker 1: that was all that they could do, because is the 522 00:33:00,680 --> 00:33:05,200 Speaker 1: German government had actually passed a law specifically for Volkswagen 523 00:33:05,640 --> 00:33:10,600 Speaker 1: that prevented any single shareholder from acquiring more than of 524 00:33:10,640 --> 00:33:13,080 Speaker 1: the ownership of the company. And this was in large 525 00:33:13,080 --> 00:33:18,480 Speaker 1: part because Lower Saxony, the government region of Lower Saxony, 526 00:33:18,760 --> 00:33:21,800 Speaker 1: was an owner of Volkswagen. If you listen to my 527 00:33:21,840 --> 00:33:24,360 Speaker 1: first episode you remember I mentioned that that the trade 528 00:33:24,480 --> 00:33:28,760 Speaker 1: unions still to this day have a powerful voice within 529 00:33:28,840 --> 00:33:33,920 Speaker 1: the operations of Volkswagen, and technically Lower Saxony had a 530 00:33:34,120 --> 00:33:39,520 Speaker 1: little more than ownership of Volkswagen. So by passing this law, 531 00:33:40,160 --> 00:33:43,680 Speaker 1: Germany was preventing anyone else from getting more power in 532 00:33:43,760 --> 00:33:48,880 Speaker 1: the company than Lower Saxony had, So this government group 533 00:33:49,560 --> 00:33:54,280 Speaker 1: would have the most powerful say in the company as 534 00:33:54,280 --> 00:33:57,920 Speaker 1: long as everyone else was limited to ownership or less. 535 00:33:58,400 --> 00:34:01,800 Speaker 1: But then the European Union come challenged this law in 536 00:34:01,840 --> 00:34:05,280 Speaker 1: two thousand seven and things started to change, and perhaps 537 00:34:05,320 --> 00:34:08,919 Speaker 1: emboldened by that challenge, the Porsche Holding Company increased its 538 00:34:09,000 --> 00:34:13,520 Speaker 1: steak in Volkswagen to nearly of the shares, so now 539 00:34:13,560 --> 00:34:18,200 Speaker 1: it owned more of Volkswagen than Lower Saxony did. Little 540 00:34:18,200 --> 00:34:21,160 Speaker 1: by little Porsche would add more shares of Volkswagen to 541 00:34:21,360 --> 00:34:25,239 Speaker 1: its steak, and the process was incredibly expensive. So by 542 00:34:25,239 --> 00:34:28,239 Speaker 1: two thousand nine, when Porsche held more than fifty percent 543 00:34:28,320 --> 00:34:32,720 Speaker 1: ownership so it had controlling interest in Volkswagen, it became 544 00:34:32,760 --> 00:34:35,840 Speaker 1: clear that it was not going to be sustainable. Porsche 545 00:34:35,880 --> 00:34:39,160 Speaker 1: of the company was in debt up to its corporate eyeballs. 546 00:34:39,560 --> 00:34:42,560 Speaker 1: So then in a move that I still find perplexing. 547 00:34:43,040 --> 00:34:47,759 Speaker 1: Volkswagen goes and acquires forty nine point nine percent ownership 548 00:34:48,160 --> 00:34:51,960 Speaker 1: in Porsche Automobile Group as in the actual automobile company. 549 00:34:52,080 --> 00:34:55,880 Speaker 1: All right, now, follow me here. Porsche the holding company 550 00:34:56,040 --> 00:35:01,120 Speaker 1: takes majority ownership of Volkswagen Group. Volks Wagon Group has 551 00:35:01,239 --> 00:35:05,359 Speaker 1: nearly fifty percent ownership of the Porsche Car Company. Say 552 00:35:05,360 --> 00:35:07,840 Speaker 1: I told you this was confusing. Now, at this point, 553 00:35:08,320 --> 00:35:12,720 Speaker 1: the Volkswagen and Porsche companies were in talks of actually 554 00:35:12,800 --> 00:35:16,800 Speaker 1: merging together, but that didn't happen as the EU Commission 555 00:35:16,960 --> 00:35:18,960 Speaker 1: seemed ready to oppose the move and there were some 556 00:35:19,080 --> 00:35:22,239 Speaker 1: legal risks, but that would all get settled by two 557 00:35:22,320 --> 00:35:25,600 Speaker 1: thousand twelve because then Volkswagen would go ahead and purchase 558 00:35:25,680 --> 00:35:29,440 Speaker 1: the remaining interest in the Porsche Automotive Company, not the 559 00:35:29,440 --> 00:35:33,600 Speaker 1: holding company, but the actual car company. In addition, managers 560 00:35:33,600 --> 00:35:36,800 Speaker 1: in Volkswagen were to become managers in Porsche s C, 561 00:35:37,160 --> 00:35:39,920 Speaker 1: which would ensure that Volkswagen would remain the dominant party 562 00:35:39,960 --> 00:35:43,160 Speaker 1: at the table. Now, another part of the reason why 563 00:35:43,200 --> 00:35:45,600 Speaker 1: this all gets so messy is that the families involved 564 00:35:45,640 --> 00:35:50,319 Speaker 1: were feuding. On the Porsche side, you had Wolfgang Porsche, 565 00:35:50,360 --> 00:35:53,560 Speaker 1: who was widely regarded as the head of that family, 566 00:35:53,960 --> 00:35:56,920 Speaker 1: so you can think of Wolfgang as the godfather of 567 00:35:56,960 --> 00:36:00,480 Speaker 1: the Porsche's. On the pH side, you had Ferdinand pH, 568 00:36:00,560 --> 00:36:04,080 Speaker 1: the former Volkswagen CEO and then the chairman of Volkswagen's 569 00:36:04,120 --> 00:36:07,839 Speaker 1: Supervisory Board. The two were trying to outmaneuver each other 570 00:36:07,880 --> 00:36:12,640 Speaker 1: throughout this entire process, and pH had clear contempt for 571 00:36:12,719 --> 00:36:16,440 Speaker 1: his cousin. There are lots of stories about pH insulting 572 00:36:16,480 --> 00:36:19,440 Speaker 1: the Porsche side of the family, with one report claiming 573 00:36:19,760 --> 00:36:24,200 Speaker 1: that pH likened the Porsche's two pigs and then likened 574 00:36:24,320 --> 00:36:27,600 Speaker 1: himself to a bore. And what he was saying, well, 575 00:36:27,640 --> 00:36:30,719 Speaker 1: he was alluding to the fact that he Psh had 576 00:36:30,800 --> 00:36:33,799 Speaker 1: grown up going to a tough boarding school, and he 577 00:36:33,840 --> 00:36:37,040 Speaker 1: had put in the work to grow Volkswagen over the years. 578 00:36:37,080 --> 00:36:40,760 Speaker 1: He was an engineer, he actually did the work, whereas 579 00:36:40,800 --> 00:36:44,600 Speaker 1: the Porsche side, all of them went to fancy prep schools, 580 00:36:45,200 --> 00:36:47,600 Speaker 1: they had no interest in engineering, and most of them 581 00:36:47,600 --> 00:36:50,799 Speaker 1: were lawyers, so it was clear he didn't have a 582 00:36:50,880 --> 00:36:54,719 Speaker 1: very high opinion. This would continue to boil over over 583 00:36:54,760 --> 00:36:57,080 Speaker 1: the following years. I'll explain more in just a moment, 584 00:36:57,120 --> 00:37:07,239 Speaker 1: but first let's take another quick break. Okay, So that 585 00:37:07,320 --> 00:37:10,440 Speaker 1: whole corporate mess. I just covered kind of boils down 586 00:37:10,440 --> 00:37:15,239 Speaker 1: to Volfgang Porsche and Ferdinand pH facing off against each other, 587 00:37:15,520 --> 00:37:19,400 Speaker 1: with pH ultimately winning at least a little bit. And 588 00:37:19,440 --> 00:37:22,600 Speaker 1: if it weren't for that darn diesel Gate scandal, this 589 00:37:22,640 --> 00:37:26,120 Speaker 1: would likely be the most crazy part of the Volkswagen story. 590 00:37:26,880 --> 00:37:29,520 Speaker 1: But then we do have the diesel Gate scandals. Let's 591 00:37:29,520 --> 00:37:32,040 Speaker 1: talk about what that was and what it means. So 592 00:37:32,120 --> 00:37:35,520 Speaker 1: back in the mid two thousand's, Volkswagen began to make 593 00:37:35,560 --> 00:37:40,640 Speaker 1: a serious marketing push, designing diesel based vehicles for the 594 00:37:40,719 --> 00:37:45,719 Speaker 1: United States and other markets and instead of gasoline powered vehicles. 595 00:37:45,719 --> 00:37:48,600 Speaker 1: So diesel engines were invented by a guy named Diesel, 596 00:37:48,960 --> 00:37:51,400 Speaker 1: and he built a combustion engine that he intended to 597 00:37:51,480 --> 00:37:53,919 Speaker 1: run off of stuff like peanut oil. And in fact, 598 00:37:53,960 --> 00:37:57,080 Speaker 1: you can run diesel engines off of some plant based oils. 599 00:37:57,719 --> 00:37:59,640 Speaker 1: Sometimes you want to do a little bit of processing 600 00:37:59,640 --> 00:38:02,000 Speaker 1: before you do that, but you can do it. Diesel 601 00:38:02,040 --> 00:38:06,320 Speaker 1: engines can't run at a much higher efficiency than gasoline engines, 602 00:38:06,880 --> 00:38:09,719 Speaker 1: so you can run a diesel engine for longer with 603 00:38:09,800 --> 00:38:13,680 Speaker 1: a comparable amount of fuel than a gasoline engine. Now 604 00:38:13,719 --> 00:38:16,279 Speaker 1: I could do a full episode to lay out the 605 00:38:16,320 --> 00:38:20,800 Speaker 1: differences between diesel and gasoline engines, but really for the consumer, 606 00:38:20,840 --> 00:38:23,920 Speaker 1: a big differentiating factor is just how far you can 607 00:38:23,960 --> 00:38:27,040 Speaker 1: travel per given amount of fuel. Diesel cars get more 608 00:38:27,040 --> 00:38:30,120 Speaker 1: miles to the gallon than gasoline based cars, and there 609 00:38:30,160 --> 00:38:32,160 Speaker 1: are a lot of other factors that determine whether or 610 00:38:32,200 --> 00:38:35,560 Speaker 1: not it makes financial sense to go with diesel over gasoline. 611 00:38:35,719 --> 00:38:38,320 Speaker 1: That includes the cost of the fuel, because if diesel 612 00:38:38,400 --> 00:38:41,600 Speaker 1: is significantly more expensive the gasoline, you have to factor 613 00:38:41,640 --> 00:38:43,840 Speaker 1: that in as well as the purchase price of the vehicle. 614 00:38:43,920 --> 00:38:46,360 Speaker 1: Of diesel vehicles are more expensive than you may not 615 00:38:46,680 --> 00:38:49,400 Speaker 1: see a financial benefit to going with diesel as opposed 616 00:38:49,440 --> 00:38:53,120 Speaker 1: to gasoline, but that's neither here nor there for the scandal. Now, 617 00:38:53,120 --> 00:38:55,759 Speaker 1: one of the things car companies must do is they 618 00:38:55,800 --> 00:38:59,120 Speaker 1: have to meet emissions standards with their vehicles in order 619 00:38:59,160 --> 00:39:01,640 Speaker 1: to be able to do business within certain countries like 620 00:39:01,680 --> 00:39:05,800 Speaker 1: the United States. And this is all related to environmental impact. 621 00:39:05,960 --> 00:39:08,880 Speaker 1: So your cars have to perform at a certain standard, 622 00:39:09,239 --> 00:39:13,240 Speaker 1: you know, beneath a threshold, or the United States government 623 00:39:13,280 --> 00:39:16,000 Speaker 1: doesn't allow you to sell those cars in the US market. 624 00:39:16,760 --> 00:39:19,400 Speaker 1: So back in the mid two thousand's, some engineers at 625 00:39:19,440 --> 00:39:21,600 Speaker 1: Volkswagen we're trying to figure out how to make a 626 00:39:21,640 --> 00:39:25,920 Speaker 1: diesel engine that would operate within the restrictions on emissions 627 00:39:26,000 --> 00:39:29,920 Speaker 1: that the United States government had established. But they also 628 00:39:29,960 --> 00:39:33,640 Speaker 1: were working with very tight restrictions within Volkswagen itself. So 629 00:39:33,960 --> 00:39:38,160 Speaker 1: the culture within Volkswagen was success at any cost. I mean, 630 00:39:38,520 --> 00:39:41,760 Speaker 1: pH had had proven that he was willing to spend 631 00:39:41,800 --> 00:39:46,600 Speaker 1: tons of money to succeed at various engineering tasks, but 632 00:39:46,640 --> 00:39:49,920 Speaker 1: at the same time, the restrictions were so tight on 633 00:39:49,960 --> 00:39:52,880 Speaker 1: this department, they didn't have very many options. So they 634 00:39:52,920 --> 00:39:55,719 Speaker 1: realized that rather than actually changing the engine, which was 635 00:39:55,760 --> 00:39:57,839 Speaker 1: going to be very expensive and beyond the budget they 636 00:39:57,840 --> 00:40:00,880 Speaker 1: were given and beyond their capabilities, they could instead make 637 00:40:00,920 --> 00:40:04,399 Speaker 1: a few tweaks to some software algorithms to make the 638 00:40:04,440 --> 00:40:08,919 Speaker 1: engines operate at or below emissions thresholds, and that would 639 00:40:08,960 --> 00:40:11,440 Speaker 1: allow them to stay within budget for the development of 640 00:40:11,440 --> 00:40:15,319 Speaker 1: the cars. There's only one problem. The tweaks meant that 641 00:40:15,400 --> 00:40:19,920 Speaker 1: Volkswagen was going to essentially be cheating on emissions tests. Now, 642 00:40:19,960 --> 00:40:22,719 Speaker 1: this didn't get discovered right away. It wasn't until two 643 00:40:22,760 --> 00:40:27,439 Speaker 1: thousand fourteen when some West Virginia University researchers found that 644 00:40:27,640 --> 00:40:30,719 Speaker 1: two cars that they were testing a Volkswagen Jetta and 645 00:40:30,719 --> 00:40:35,279 Speaker 1: a Volkswagen Pasat emitted much higher emissions levels than what 646 00:40:35,480 --> 00:40:40,200 Speaker 1: they should be doing based upon emissions testing. Now. Volkswagen's 647 00:40:40,239 --> 00:40:43,960 Speaker 1: official response initially anyway, was that there must have been 648 00:40:44,040 --> 00:40:48,200 Speaker 1: some sort of unexpected technical issue and unusual test conditions 649 00:40:48,200 --> 00:40:51,640 Speaker 1: that led to this. Engineers at Volkswagen sent a memo 650 00:40:51,719 --> 00:40:55,040 Speaker 1: to CEO Martin winter Corn at the time or vinter Corn, 651 00:40:55,600 --> 00:40:57,799 Speaker 1: but it's not known if vinter Corn actually saw that 652 00:40:57,840 --> 00:41:00,680 Speaker 1: particular memo because it was bundled with a whole bunch 653 00:41:00,680 --> 00:41:02,600 Speaker 1: of other memos at the time. Um there are a 654 00:41:02,600 --> 00:41:04,880 Speaker 1: lot of people who suggest that perhaps he knew about 655 00:41:04,920 --> 00:41:08,239 Speaker 1: this early on, and others who say that maybe he didn't. Well, 656 00:41:08,280 --> 00:41:12,640 Speaker 1: Volkswagen would issue a recall on diesel vehicles. They recalled 657 00:41:12,640 --> 00:41:14,880 Speaker 1: all of them. I guess it's recall, not a recall 658 00:41:17,800 --> 00:41:20,240 Speaker 1: behind the current guys. I've had two hours sleep, So anyway, 659 00:41:20,719 --> 00:41:25,560 Speaker 1: the California Air Resources Board or CARB would then find 660 00:41:25,719 --> 00:41:29,960 Speaker 1: some irregularities on supposedly fixed vehicles in two thousand fifteen. 661 00:41:30,000 --> 00:41:33,680 Speaker 1: These are vehicles that Volkswagen had supposedly recalled and then 662 00:41:34,320 --> 00:41:39,000 Speaker 1: fixed and then put back into the market. But the 663 00:41:39,120 --> 00:41:43,560 Speaker 1: CARB was finding that there were still these irregularities. Then 664 00:41:43,719 --> 00:41:48,120 Speaker 1: the engineers at CARB we're finding that Volkswagen's explanations for 665 00:41:48,160 --> 00:41:51,560 Speaker 1: why those irregularities were happening didn't seem to actually match 666 00:41:51,680 --> 00:41:55,400 Speaker 1: up what they were seeing. Then the Environmental Protection Agency 667 00:41:55,440 --> 00:41:57,680 Speaker 1: goes and tells Volkswagen, Hey, you know, we're not gonna 668 00:41:57,760 --> 00:42:00,280 Speaker 1: let you sell any of your twenty six d SILD 669 00:42:00,320 --> 00:42:02,640 Speaker 1: vehicles in the United States. And it was at that 670 00:42:02,640 --> 00:42:05,560 Speaker 1: point the Volkswagen said, oh, um, are bad. Actually, we 671 00:42:05,680 --> 00:42:08,879 Speaker 1: just found out there's some software regularities, and then they 672 00:42:08,880 --> 00:42:11,799 Speaker 1: explained what was going on, and that leads us to 673 00:42:11,880 --> 00:42:18,120 Speaker 1: the actual scandal. So essentially, when the vehicle's computer detected 674 00:42:18,160 --> 00:42:20,640 Speaker 1: that it was going into emissions testing, that someone was 675 00:42:20,680 --> 00:42:24,959 Speaker 1: connecting their testing equipment to the vehicle's computer, it would 676 00:42:24,960 --> 00:42:29,279 Speaker 1: then engage systems that would limit emissions. They would also 677 00:42:29,520 --> 00:42:34,319 Speaker 1: decrease engine performance. Now, if the cars just operated in 678 00:42:34,360 --> 00:42:37,399 Speaker 1: that mode all the time, we wouldn't be talking about 679 00:42:37,400 --> 00:42:40,560 Speaker 1: a scandal. But Volkswagen probably wouldn't have seen as many 680 00:42:40,640 --> 00:42:43,920 Speaker 1: sales because drivers would be disappointed. They would feel like 681 00:42:43,960 --> 00:42:47,240 Speaker 1: the cars were not performing very well, they were underpowered, 682 00:42:47,880 --> 00:42:51,400 Speaker 1: their performance just wouldn't meet expectations. So in order to 683 00:42:51,400 --> 00:42:54,680 Speaker 1: meet expectations, they needed to have the engines have a 684 00:42:54,800 --> 00:42:57,719 Speaker 1: higher output of power. But if they did the higher 685 00:42:57,719 --> 00:43:02,000 Speaker 1: outpuput of power, you have higher emissions. So if a 686 00:43:02,120 --> 00:43:07,520 Speaker 1: Volkswagen diesel cars computer detected that it was connected to 687 00:43:07,600 --> 00:43:12,239 Speaker 1: emissions testing, it would initiate this dampening system and you 688 00:43:12,280 --> 00:43:16,720 Speaker 1: would have lower emissions and lower output. But then once 689 00:43:16,840 --> 00:43:19,600 Speaker 1: it was detected that it was no longer connected to 690 00:43:19,640 --> 00:43:25,240 Speaker 1: an emissions testing machine, it would disengage those dampening systems 691 00:43:25,280 --> 00:43:27,759 Speaker 1: and the car's performance would improve significantly, but it would 692 00:43:27,800 --> 00:43:33,440 Speaker 1: also emit way more pollution, including stuff like nitrogen oxide, 693 00:43:33,960 --> 00:43:38,879 Speaker 1: and it would be well beyond what was the emissions threshold. 694 00:43:39,800 --> 00:43:42,600 Speaker 1: So in other words, the cars were cheating on tests. 695 00:43:42,920 --> 00:43:45,480 Speaker 1: When the teacher was looking, and in this case the 696 00:43:45,520 --> 00:43:48,640 Speaker 1: teacher is someone performing an emissions test, then the vehicle 697 00:43:48,719 --> 00:43:52,600 Speaker 1: would pull its punches and purposefully underperform, emitting fewer gases, 698 00:43:52,960 --> 00:43:55,160 Speaker 1: and then once the teacher was looking somewhere else, it 699 00:43:55,239 --> 00:43:58,319 Speaker 1: was party time. Well. The e p A was not 700 00:43:58,520 --> 00:44:02,400 Speaker 1: amused and concluded the Volkswagen had purposefully tried to circumvent 701 00:44:02,440 --> 00:44:05,440 Speaker 1: the Clean Air Act in the United States, and further 702 00:44:05,840 --> 00:44:08,560 Speaker 1: that the Department of Justice would have the authority to 703 00:44:08,640 --> 00:44:12,120 Speaker 1: impose a total of thirty seven thousand, five hundred dollars 704 00:44:12,160 --> 00:44:16,480 Speaker 1: of civil finds per vehicle that used this kind of 705 00:44:16,520 --> 00:44:21,280 Speaker 1: work around, like as in each individual vehicle. The defeat 706 00:44:21,280 --> 00:44:25,000 Speaker 1: devices were in vehicles spanning model years from two thousand 707 00:44:25,080 --> 00:44:28,919 Speaker 1: nine to two thousand sixteen, so if you added them 708 00:44:28,960 --> 00:44:31,840 Speaker 1: all up, it would mean that Volkswagen could potentially face 709 00:44:31,920 --> 00:44:36,600 Speaker 1: a maximum up to eighteen billion dollars in fines alone. 710 00:44:37,719 --> 00:44:41,000 Speaker 1: Volkswagen then admitted that the same defeat system was in 711 00:44:41,080 --> 00:44:45,359 Speaker 1: place in eleven million diesel cars around the world, and 712 00:44:45,440 --> 00:44:48,680 Speaker 1: that Volkswagen had already set aside several billion dollars worth 713 00:44:48,760 --> 00:44:53,600 Speaker 1: to fix these affected cars. Then came criminal proceedings against 714 00:44:53,640 --> 00:44:57,000 Speaker 1: engineers and executives at Volkswagen, both in the United States 715 00:44:57,000 --> 00:44:59,760 Speaker 1: and in Germany, as well as a scramble to figure 716 00:44:59,800 --> 00:45:02,719 Speaker 1: out how to buy back vehicles that didn't meet the 717 00:45:02,719 --> 00:45:06,760 Speaker 1: emission standards. So in total it would cost Volkswagen around 718 00:45:07,080 --> 00:45:12,560 Speaker 1: thirty billion dollars. That is a princely sum and an 719 00:45:12,719 --> 00:45:18,360 Speaker 1: enormously expensive mistake. And mistake in judgment, I should say, 720 00:45:18,440 --> 00:45:21,480 Speaker 1: it's not like they accidentally did this. They the engineers 721 00:45:21,520 --> 00:45:25,520 Speaker 1: that did this did this knowingly, and the costs went 722 00:45:25,560 --> 00:45:29,440 Speaker 1: beyond the monetary Martin went vinder Korn, who was CEO 723 00:45:29,560 --> 00:45:33,080 Speaker 1: when the scandal first broke, would end up accepting responsibility, 724 00:45:33,160 --> 00:45:36,520 Speaker 1: but he also denied that he had had any personal 725 00:45:36,560 --> 00:45:38,920 Speaker 1: wrongdoing involved in this. He said that he had no 726 00:45:39,080 --> 00:45:43,760 Speaker 1: direct hand knowledge and he had no uh direct involvement 727 00:45:43,760 --> 00:45:46,400 Speaker 1: in the decision to try and circumvent clean air laws. 728 00:45:46,640 --> 00:45:48,960 Speaker 1: But he also said that as CEO, he has to 729 00:45:48,960 --> 00:45:52,360 Speaker 1: be held responsible for this sort of thing happening under 730 00:45:52,440 --> 00:45:55,480 Speaker 1: his watch. So he resigned his position and he was 731 00:45:55,520 --> 00:46:00,839 Speaker 1: replaced by Matthias Mueller, who pledged to cooperate with investigators 732 00:46:00,840 --> 00:46:03,040 Speaker 1: to get to the bottom of who was responsible, while 733 00:46:03,080 --> 00:46:06,040 Speaker 1: also making amends to customers who were directly affected by 734 00:46:06,080 --> 00:46:09,760 Speaker 1: the scheme. Now, Mueller was previously the CEO of Porsche, 735 00:46:10,520 --> 00:46:13,600 Speaker 1: which also would end up getting pulled into this diesel 736 00:46:13,680 --> 00:46:16,560 Speaker 1: Gate scandal. It wasn't just Volkswagen vehicles. There are also 737 00:46:16,600 --> 00:46:19,600 Speaker 1: some Porsche vehicles and Aldi vehicles that would be involved 738 00:46:19,600 --> 00:46:23,200 Speaker 1: in this. So he would serve as Volkswagen CEO only 739 00:46:23,320 --> 00:46:26,600 Speaker 1: until two thousand eighteen, and that was when the Board 740 00:46:26,600 --> 00:46:30,400 Speaker 1: of Directors kicked him out, largely because the company as 741 00:46:30,440 --> 00:46:33,160 Speaker 1: a whole had been perceived as moving too slowly to 742 00:46:33,239 --> 00:46:36,799 Speaker 1: address the problems that arose due to Diesel Gate. So 743 00:46:36,880 --> 00:46:41,120 Speaker 1: his replacement was Herbert die who was formerly the brand 744 00:46:41,239 --> 00:46:43,840 Speaker 1: chief over at Volkswagen. So this is becoming like a 745 00:46:43,920 --> 00:46:48,360 Speaker 1: revolving door situation with these quick turnarounds and CEOs. Ferdinand 746 00:46:48,360 --> 00:46:53,120 Speaker 1: Psh resigned from the supervisory board of Volkswagen in April 747 00:46:53,160 --> 00:46:57,160 Speaker 1: two fifteen. This would be before Martin Vinterkorn was had 748 00:46:57,160 --> 00:47:00,640 Speaker 1: to resign. Then pH would sell off his shares in 749 00:47:00,760 --> 00:47:06,160 Speaker 1: Volkswagen in May of two thousand fifteen, essentially divorcing himself 750 00:47:06,160 --> 00:47:11,200 Speaker 1: from the company entirely. This predated Martin Vintercorne's resignation as well, 751 00:47:11,360 --> 00:47:14,200 Speaker 1: So in fact Psh was attempting to have Vindercorn actually 752 00:47:14,239 --> 00:47:17,640 Speaker 1: removed as CEO, and this is what led to pH 753 00:47:17,680 --> 00:47:19,480 Speaker 1: to saying he was going to step away from the company. 754 00:47:19,640 --> 00:47:22,600 Speaker 1: He voted to have Vindercorn removed, but he was the 755 00:47:22,640 --> 00:47:25,560 Speaker 1: only member of the steering committee to do so. Uh, 756 00:47:25,760 --> 00:47:30,480 Speaker 1: the others all voted against him, and Wolfgang Porsche, his rival, 757 00:47:31,040 --> 00:47:34,360 Speaker 1: his cousin, was one of the parties who was, you know, 758 00:47:34,600 --> 00:47:41,040 Speaker 1: essentially campaigning against pH. So pH left the company, sold 759 00:47:41,040 --> 00:47:43,480 Speaker 1: off his interest, and then he threw a whole bunch 760 00:47:43,480 --> 00:47:46,680 Speaker 1: of executives under the bus as he left. He implied 761 00:47:47,080 --> 00:47:49,560 Speaker 1: that a lot of people in senior levels of management, 762 00:47:49,600 --> 00:47:52,560 Speaker 1: including all the way up to the executive level, knew 763 00:47:52,600 --> 00:47:56,720 Speaker 1: about and had approved of, the illegal technology that allowed 764 00:47:56,920 --> 00:48:00,800 Speaker 1: Volkswagen's diesel engines to cheat on emissions tests. Now, whether 765 00:48:00,840 --> 00:48:03,560 Speaker 1: his allegations were true or not was uncertain, But he 766 00:48:03,680 --> 00:48:06,400 Speaker 1: dumped a ton of fuel on the fire, and I 767 00:48:06,440 --> 00:48:09,160 Speaker 1: guess it must have been gasoline fuel, because diesel doesn't 768 00:48:09,239 --> 00:48:13,360 Speaker 1: burn like gasolene does. Don't try that at home. Pish 769 00:48:13,560 --> 00:48:16,520 Speaker 1: would end up passing away at age eighty two in 770 00:48:16,600 --> 00:48:22,160 Speaker 1: two thousand nineteen. He left behind twelve or maybe thirteen children. 771 00:48:22,680 --> 00:48:24,920 Speaker 1: The numbers aren't entirely clear. There are a lot. There's 772 00:48:24,920 --> 00:48:28,240 Speaker 1: a lot of actual disagreement. Um, he was married twice 773 00:48:28,480 --> 00:48:31,120 Speaker 1: and he had a couple of kids outside of marriage. 774 00:48:31,360 --> 00:48:34,239 Speaker 1: In fact, one a couple of them were with the 775 00:48:34,480 --> 00:48:39,160 Speaker 1: estranged wife of his cousin, So he had an affair 776 00:48:39,200 --> 00:48:41,960 Speaker 1: with his cousin's wife. Told you this was like game 777 00:48:42,000 --> 00:48:45,960 Speaker 1: of Thrones, man, I was not kidding. So Volkswagen is 778 00:48:46,000 --> 00:48:49,280 Speaker 1: still managing the consequences of diesel Gate. To this day, 779 00:48:49,760 --> 00:48:53,040 Speaker 1: CEO Herbert Diese is at the center of some criminal 780 00:48:53,160 --> 00:48:57,080 Speaker 1: charges that state he and other Volkswagen executives were waiting 781 00:48:57,200 --> 00:49:00,360 Speaker 1: too long to inform investors of the extent and nature 782 00:49:00,400 --> 00:49:03,719 Speaker 1: of the diesel Gate scandal, and that as such they 783 00:49:03,760 --> 00:49:06,880 Speaker 1: were essentially committing fraud. They were telling investors that the 784 00:49:06,920 --> 00:49:10,280 Speaker 1: company was in much better shape than it actually was. Meanwhile, 785 00:49:10,600 --> 00:49:14,319 Speaker 1: Volkswagen is trying to move beyond this disaster. It has 786 00:49:14,360 --> 00:49:17,800 Speaker 1: announced a plan that by t we're gonna see the 787 00:49:17,840 --> 00:49:21,319 Speaker 1: company producing one and a half million electric cars, and 788 00:49:21,360 --> 00:49:23,479 Speaker 1: that number actually keeps climbing, so it might be higher 789 00:49:23,520 --> 00:49:26,200 Speaker 1: by the time you hear this episode in Volkswagen also 790 00:49:26,239 --> 00:49:30,480 Speaker 1: produced the final Edition Volkswagen Beetle, which was an updated 791 00:49:30,600 --> 00:49:34,759 Speaker 1: version of the new Beatle, and that that last one, 792 00:49:34,840 --> 00:49:38,080 Speaker 1: the very last final edition Volkswagen Beetle, rolled off the 793 00:49:38,080 --> 00:49:42,200 Speaker 1: production line in July two th nineteen. So now the 794 00:49:42,239 --> 00:49:48,160 Speaker 1: Volkswagen Beetle is retired again. But who knows, maybe the 795 00:49:48,160 --> 00:49:50,320 Speaker 1: company is going to bring it back out of retirement 796 00:49:50,360 --> 00:49:52,320 Speaker 1: one more time in an effort to climb out of 797 00:49:52,360 --> 00:49:55,919 Speaker 1: this massive mess. It finds itself in and that's where 798 00:49:55,960 --> 00:49:59,120 Speaker 1: Volkswagen is today. As I said, I found this story 799 00:49:59,160 --> 00:50:02,360 Speaker 1: to be fascinating, not just from a technological standpoint, but 800 00:50:02,440 --> 00:50:07,440 Speaker 1: just from the political, social, corporate side. It's so complicated, 801 00:50:07,560 --> 00:50:12,880 Speaker 1: and it's it's so so closely tied with family feuding. 802 00:50:13,040 --> 00:50:18,960 Speaker 1: I had no idea about Volkswagen's involvement with the Porsche family, 803 00:50:19,480 --> 00:50:23,560 Speaker 1: um largely because it's a European company, and my my 804 00:50:24,040 --> 00:50:27,319 Speaker 1: vision of Volkswagen has always been the Volkswagen Beetle. That's 805 00:50:27,400 --> 00:50:29,839 Speaker 1: if you say the word Volkswagen to me, I think 806 00:50:29,840 --> 00:50:32,760 Speaker 1: of the old VW Beetle and this sort of quirky, 807 00:50:33,080 --> 00:50:36,960 Speaker 1: iconic vehicle that's associated with like the hippies and the 808 00:50:36,960 --> 00:50:39,160 Speaker 1: the Summer of Love and that kind of stuff, and 809 00:50:39,160 --> 00:50:42,440 Speaker 1: and Disney movies. I don't think of a company that 810 00:50:42,520 --> 00:50:46,920 Speaker 1: was founded, you know, and well or at least funded 811 00:50:47,040 --> 00:50:52,560 Speaker 1: by Nazis and then run by various people who were 812 00:50:53,200 --> 00:50:57,520 Speaker 1: having crazy feuds with each other in power struggles like 813 00:50:57,640 --> 00:50:59,720 Speaker 1: None of that ever occurred to me, And I definitely 814 00:50:59,719 --> 00:51:04,520 Speaker 1: didn't know that Volkswagen had purchased brands like Lamborghini and Bugatti, 815 00:51:04,680 --> 00:51:09,280 Speaker 1: probably because those cars are just a hair outside of 816 00:51:09,360 --> 00:51:14,799 Speaker 1: my price range. By a few hundred thousand dollars, but 817 00:51:14,920 --> 00:51:17,080 Speaker 1: it was an interesting thing to look into. If you 818 00:51:17,120 --> 00:51:20,560 Speaker 1: guys have any suggestions for future topics of tech stuff, 819 00:51:20,600 --> 00:51:23,960 Speaker 1: whether it's a company, a technology, maybe it's a trend 820 00:51:24,080 --> 00:51:26,680 Speaker 1: in tech you would like me to talk about, let 821 00:51:26,719 --> 00:51:29,760 Speaker 1: me know. Send me a message on Facebook or Twitter. 822 00:51:29,880 --> 00:51:31,919 Speaker 1: The handle we use at both of those is tech 823 00:51:32,000 --> 00:51:36,759 Speaker 1: Stuff HSW and I'll talk to you again really soon. 824 00:51:40,880 --> 00:51:43,080 Speaker 1: Tex Stuff is a production of I Heart Radio's How 825 00:51:43,160 --> 00:51:46,520 Speaker 1: Stuff Works. For more podcasts from my heart Radio, visit 826 00:51:46,560 --> 00:51:49,600 Speaker 1: the i heart Radio app, Apple Podcasts, or wherever you 827 00:51:49,719 --> 00:51:51,080 Speaker 1: listen to your favorite shows.