Adolf Merckle Sees Empire Crumble, Tries Not To Explode With Rage As VW Chiefs Cash In €25m-Worth Of Shares

Troubled rich German Adolf Merckle, who we’ve been following recently, has had to hand over parts of all his companies to German banks after his bid to get the personal bailout treatment from the state failed. The banks get them as collateral for loans Merckle can’t pay; they’ll presumably then sell these stakes on to get the cash back, once the market is a bit more stable. 

You may remember that Merckle was murked by short-selling shares in VW, which then skyrocketed after Porsche revealed they owned much of the company, thus losing Merckle, and many others who similarly hedged wrongly, hundreds of millions of euros. Porsche got criticised by some in the financial community, generally the hedge funders who lost big and presumably smashed up their own Porsches in acts of misplaced retribution.

So Merckle won’t be heartened to know that, in a moment of glorious financial symmetry, VW’s employees have made hundreds of millions of euros in selling their shares during the price spike. The board members themselves got in on the action, making €25m between them; meanwhile Merckle is having to dip into his personal fortune to help provide collateral to banks. God, that’s got to hurt.

VW has sensibly tried to morally legitimise this shameless exploitation of good fortune/share manipulation, with the executives announcing that they’re giving 10% of their windfall to charidee, helping little kinder in Wolfsburg where VW is based. Not sure that’s enough – I think you’d need to pay Wolfsburg’s college education and provide free school milk to prevent the inevitable howls of rage over the next few days. Yes, this truly is a classic week for unconvincing PR from major car manufacturers.

I like this bit of padding from the FT when they reported this story today: “The windfall for VW senior management is likely to create political controversy in Germany, where executives of large listed companies are commonly criticised for earning big bonuses”. I think that’s more of a non-Germany-specific thing really.

Posted by Ben Beaumont-Thomas in Hot Money | December 4, 2008 1:41PM |