Adolf Merckle Commits Suicide, While Porsche Marches On

Adolf Merckle, the German entrepreneur who we followed recently as he struggled to hang onto his empire, killed himself on Monday evening by walking in front of a train. He was described as “broken” by his family; he was seeing the companies that he’d built up getting ready to be handed over to banks or sold off completely. 

While Reuters gets all po-faced and semi-poetic (“On Tuesday pale blood stains still dotted the snow along the railway track where he died. The area looked deserted apart from a police car nearby”), let’s look not at his death itself but rather at a rather cruel juxtaposition of events today, considering the circumstances of Merckle’s downfall.

What really stung his businesses was a hedge on the price of VW shares going badly wrong, making a massive loss after Porsche revealed that they were well on the way to owning 75% of VW and spiking the share price; Merckle had hedged on a fall, and lost big. Previously Porsche announced its employees were making out like bandits from selling their shares, just as Merckle was entering talks and putting up his personal fortune as collateral; the two companies’ fortunes bifurcated even more sharply today, as while Merckle’s family mourn and try to save their family business, Porsche increased its stake in VW to more than 50%. It must now make a bid for Swedish truck manufacturer Scania, 69% of which is owned by VW; it’s also challenging, in the European courts, the block on it owning 20% of the company currently owned by the state of Lower Saxony. 

Not that Porsche is being crass in doing this, but the fallout from that one share announcement is astonishing. It’s testament to the strain placed on companies by highly leveraged speculation, and the potential enormity of gains and losses, both financial and emotional, from playing with such high stakes. If Merckle’s death can bring anything, it’s a moment of sobriety and reflection from those dancing between the poles of absolute poverty and unimaginable wealth, who often, as Merckle had, have a thousands-strong workforce relying on your judgement. I don’t want to do a Time and suggest that Merckle’s death symbolises or means anything outside of a personal tragedy, but I think it’s inevitable that he will come to represent the end of wild hedges, as the fund industry contracts and the party of the last few years comes to a sad end.

Posted by Ben Beaumont-Thomas in Hot Money | January 7, 2009 10:19AM |