The Amazing Story of Porsche: From WW2 to the 911

The Amazing Story of Porsche: From WW2 to the 911

If you had to pick one car that captures the power, beauty and excitement people feel about sports cars, you would find no better candidate than the Porsche 911. What’s even more impressive is that this has been true for over 50 years. That’s why today, we’ll be exploring the history of one of Germany’s most renowned car brands, Porsche.

Our story begins in 1875 in Maffersdorf, a small town in the Austrian Empire that is now part of the Czech Republic. That was the birthplace of Ferdinand Porsche, a quiet yet ambitious boy with a gift for engineering. As a teenager he would spend most of his days in his father’s repair shop, learning the ins and outs of vehicle mechanics, while attending university at night. His persistence landed him several engineering jobs at local companies.

And by the time he was 23 he had designed his first automobile, the Porsche P1. It was basically a carriage that ran on electric motors. It was supposed to break speed records, but the 2 tons of lead-acid batteries it had kinda slowed it down. Ferdinand would later improve it with a combustion engine, creating the first ever hybrid car, the Lohner-Porsche Mixte Hybrid. It could reach 37 mph and it broke the Austrian speed record as well as winning various races.

Porsche was eventually drafted into the army, where he served as a chauffeur for none other than Archduke Franz Ferdinand. Luckily, he was back to designing cars long before that other chauffeur got the Archduke and his wife killed, kicking off the First World War.

In the early 1920s Porsche moved to Stuttgart, where he was hired by Daimler as technical director. There he designed the Mercedes-Benz SSK, arguably the greatest race car of its era, with an unbeatable top speed of 120 mph.

By 1931 Porsche had saved up enough money to start a business of his own.

He was already one of the most famous engineers in Germany, yet despite that his business didn’t take off. You see, the German economy was still in shambles in 1933 and very few people could afford cars.

This is where Hitler came in.

He had become the Chancellor of Germany on January 30 of that year and just a few days later at the Berlin Auto Show, he announced the beginning of a new era for automobiles. He wanted every German citizen to have a car that could fit a family of five, start in the cold and be very fuel efficient. Essentially, what he wanted was а people’s car; a Volkswagen, if you will. Of course, the project was extremely ambitious, which is why Hitler recruited the best engineers he had, including Ferdinand Porsche.

He began working on what would eventually become the Beetle in 1934, later becoming a member of the Nazi Party and even the SS. In 1938 Hitler unveiled a state-owned factory for Porsche’s car, which would be built by the newly-established Volkswagen Company.

During World War 2, Porsche was recruited for military projects like the Elefant heavy tank destroyer. Because of that, and his SS membership, Porsche was arrested and imprisoned for war crimes in 1945. He was released a few years later, but by that point his son, Ferry Porsche, had assumed control of the company.

He wanted to build cars with the Porsche name on them and thus in 1948, he created the Porsche 356. Its popularity didn’t really take off until it won the 1951 Le Mans race, after which it became Porsche’s flagship model. By 1965, when production finally ended, over 76,000 cars had been produced.

So, why stop production?

Well in 1963, another model started rolling off the factory floor, the Porsche 911. It was a rear-engine car that was air cooled, with two small back seats and a trunk that could fit little more than a golf bag.

Critics called it a better, more civilized 356, and they were right: the 911 became a hit sensation that built upon its predecessor’s success. It became Porsche’s best-seller despite its price tag of $6,000, which was more than most people’s annual salary at the time.

By the 1970s, Porsche were selling over 20,000 911s every year, and if you count all of its variations, the model is arguably the most successful competition car in history. Over the years it has won nearly everything: the Monte Carlo rally, the Paris-Dakar, the Targa Florio and numerous other rally and GT championships. It’s easy to see why: some estimates say that two thirds of all Porsches ever made are still on the road, which is part of the reason why the Porsche brand has endured for so long.

Their brand has been built on sports cars, which is why people lost their minds when Porsche decided to make an SUV in 2002. The Cayenne was a huge departure from anything they’d ever done before; in fact, it was Porsche’s first car with four doors. Fans of the brand were shocked and thought it would devalue Porsche’s image, but actually the opposite happened. The car was an excellent performer, and quickly rose to prominence. Today, the Cayenne and Porsche’s new SUV, the Macan, make up over 70% of the company’s sales in America.

Ownership

But let’s talk about the company’s ownership.

You probably know that Porsche is owned by Volkswagen, but it’s actually way more complicated.

So complicated, that we’ll be making a separated article just for that story.

But here’s the short version: In the decades after World War 2, Volkswagen became very successful, vastly overshadowing Porsche and selling 60 times as many cars. One day in 2005, however, these two Porsche executives decided for some reason that they wanted to acquire Volkswagen. Of course, Volkswagen was way bigger than Porsche could possibly afford, but they figured out an ingenious and barely legal way around that. Their first move was to buy call options on Volkswagen stock. Now if you’re not familiar with how call options work, they basically earn money as the stock’s price increases.

So, once the executives had enough options, they started buying the stock itself, lifting its price, earning money from the options, and using that money to buy even more stock. They continued their scheme for three years and by October 2008 Porsche controlled 74.1% of Volkswagen.

Now, by German law in order to access Volkswagen’s billions of cash reserves, Porsche needed to own 75%. But Porsche had ran out of cash long ago and had purchased thousands of shares by borrowing money. By that point the stock manipulation was so bad that Volkswagen stock had quadrupled in price, making it briefly the largest company in the world.

Then, the Great Recession happened.

Image result for porsche germany factory

All of the banks demanded their money back, but Porsche were basically broke and quickly declared bankruptcy. The two executives, however, had prepared for that. In 2007 they had created a holding company for Porsche, which owned 100% of the manufacturing business, but added an extra layer of legal security. This kept the manufacturing business alive, but ironically, when the Porsche holding company went bankrupt, it was Volkswagen who rescued them. Volkswagen purchased the entirety of the Porsche manufacturing company, which gave the Porsche holding company enough money to pay back its debts and keep a 30.8% stake in Volkswagen.

The best part, however, is that the two executives responsible for the fiasco ended up walking scot-free and with millions in severance money. Now, if barely legal market manipulation and other corporate wizardry sounds like something you may be interested in.

The Amazing Story of Porsche