The vast German automotive industry from which the Audi Quattro emerged has a long history of technical innovation, motor sport success and prestige earned through the quality of its engineering. Yet at its heart lies a tale of conquest and collaboration, alliances and schisms that could rival even the most lavish fictional saga. To understand how the Quattro was created, it is important to have a grasp upon the titanic monster that spawned it.

Motoring was born during 1895 when the engineer Gottlieb Daimler and his partner, William Maybach, had worked away on gasoline-powered internal combustion engines in Cannstatt, a district of Stuttgart. Meanwhile, in nearby Mannheim another engineer, Karl Benz, was also determined to prove that such engines could unleash the great age of adventure on land, water and ultimately in the air.

These were heady days for ambitious engineers and soon motor manufacturers began to spring up across Europe. One among them was founded in 1896 by an engineer from Daimler’s own factory; a man named August Horch.

Horch chose Saxony for his headquarters, attracting local investment from the region to establish a factory in the town of Chemnitz.

His luxurious and smooth-running cars gained an enviable reputation, upon which Horch very swiftly sold shares in the company. Then after a disagreement with his financial officer in 1909, August Horch was ousted from the company by his shareholders and forced to start all over again.

A legal battle cost Horch the use of his own name, which would remain registered to the company from which he had just been ejected, and so a suitable replacement needed to be found. ‘Horch’ is a form of the German verb to harken, so he and his investors chose Audi, the same word from the Latin language.

As with so many motor manufacturers of the age, the nascent Audi chose motor sport as a means to promote its new products. Competitions from hill climbs to grand prix racing had become a European obsession in which cars wore national racing colours and the white cars of the Kaiser’s Germany conquered all.

Chief among them was Mercedes, the brand name chosen for Daimler’s passenger cars, which gained iconic status as a grand prix winner. Technical brilliance was a priority of the Kaiser’s Germany, and armadas of white-painted racing cars were sent out while German dreadnoughts thundered down the slipways and Graf Zeppelin’s airships dominated the sky.

Soon, however, all of this industry would be harnessed to the Great War of 1914-18. The motor manufacturers of Germany and Austria-Hungary switched production to service vast military contracts until the guns fell silent in 1918, when Germany’s defeat brought chaos and long, bleak years of privation.

If Karl Benz, Gottlieb Daimler and Wilhelm Maybach should share credit for creating the motor car, it was Dr Emil Georg von StauB who, in his role on the board of Deutsche Bank, effectively founded the modern German automotive industry. It was von StauB who sought to impose economies of scale upon Daimler and Benz, leading to their merger in 1926 and the resulting brand of Mercedes-Benz.

Into this partnership, von StauB later introduced another of Deutsche Bank’s creditors, the Bayerische Motoren Werke (BMW), from Munich. Under a new ‘Treaty of Friendship’, BMW and Daimler-Benz exchanged shareholdings and a licensed copy of Britain’s little Austin 7, dubbed the BMW 3/15, went into production at Daimler’s Sindelfingen plant -founding what became known as ‘Deutschland AG’ (Germany pic).

While von StauB laboured over his investments, in Frankfurt the Opel factory was completely restructured along American lines and began to churn out cheap cars that soon would account for 40% of all German production. At that point the American giant, General Motors, swept in to buy Opel outright, threatening to derail von StauB’s dream of cherry-picking the brands he needed to create a single German entity for car production.

Where General Motors went, its great American rival Ford swiftly followed: opening a factory of its own in Cologne. German research in America revealed that it took a company like Mercedes 50 times the number of man-hours to produce a single car than Ford, but before production could be modernised the tsunami of the Great Depression arrived.

The ‘Treaty of Friendship’ helped Deutsche Bank’s factories to weather the storm but in Saxony the factories of Horch, Audi, DKW and Wanderer were foundering. All seemed lost until, at the last minute, the regional assembly of Saxony decided to invest in its own collective; creating a single new entity called Auto Union with the emblem of four rings representing its founding brands.

Within a year, Germany had adopted the totalitarian rule of National Socialism to find a way out of impoverishment. It helped the motor manufacturers that Adolf Hitler was a car buff and that one of his dearest-held ambitions was for all of Germany to be put on wheels. For all the trumpeting of its technological wonders, Germany could only boast of one car per hundred inhabitants, compared to three for every hundred British or French citizens and one car for every five Americans. This was an intolerable affront to German supremacy, in Hitler’s view.

The Fuhrer decreed that Germany would return to international motor sport and dominate as it had before the Great War, showcasing the technical mastery of the new Reich. There would be fast, wide autobahns upon which to mobilise dem Deutschen volke and a boom in car sales for domestic manufacturers. What he lacked was a truly affordable car for even the most modest of households.

Even before Hitler was in power, the astute Dr Emil Georg von StauB had positioned himself as the Fuhrer’s banker and his right-hand man on motoring matters. He shared Hitler’s vision of motorising German society and he knew exactly the man to bring this vision to life. That man was the brilliant but difficult former Mercedes designer, Ferdinand Porsche.

Porsche’s brilliance as an engineer was first demonstrated in 1899, when he built a revolutionary ‘horseless carriage’ for Jacob Lohner & Company, celebrated Viennese coachbuilder to the royal families of Europe. Using a motor of his own design, Porsche’s electric car could travel 50 miles (80km) on a single charge and reach 22mph (35kph) – faster than most contemporary gasoline and steam cars.

When customers demanded even more speed and range he developed the world’s first gasoline-electric hybrid car: the Lohner-Porsche Mixte Hybrid. It was important to note the new car’s hyphenated name, because while Porsche’s thirst for engineering was vast, it was rivalled by his desire for fame and fortune.

Lohner’s clientele brought Porsche into the circles of power but its horizons were limited. In 1906 he joined the Austrian offshoot of Daimler as head of design, overseeing a cornucopia of luxurious cars, heavyweight trucks, buses, ships and trains, all powered by internal combustion engines. During the First World War, Porsche’s role saw him design arguably the best aero engine of the war, the straight-six Austro-Daimler. He also witnessed the enormous benefits – and profits – that could be wrung from mass production.

After the war, Porsche relocated to Stuttgart and the heart of Daimler-Benz, where he designed a series of racing cars to showcase Mercedes technology that was crowned with the supercharged SSK. Their victories brought Porsche more renown but as early as 1926, Porsche was agitating to push ahead with the idea of a small, cheap car to be sold to the masses. Daimler-Benz eventually turned him down and so Porsche chose to leave.

He briefly returned to Austria with Steyr but again the idea of a Volks-wagen (people’s car) was rejected and he walked away from that job, too. Through these travails, von StauB had maintained personal links with Porsche and in 1931 counselled him to set up an independent design bureau. With Porsche’s son-in-law Anton Piech managing the legal and administrative side of the agency, the capital to get the Porsche Design Bureau underway was raised by another of von StauB’s contacts, the wealthy former Benz racing driver, Alfred Rosenberger.

After the Second World War, the Porsche family returned to its satellite factory in Gmund, Austria, to build Volkswagenbased sports cars.

Porsche’s agency started out by designing a simple mid-range car for Wanderer, while trying and failing to get Porsche’s low-cost Volks-wagen concept off the ground with DKW and motorcycle manufacturer NSU. Their next big project was for a grand prix racing car that would be funded by Auto Union and the German government.

The Auto Union project got Porsche in front of Hitler himself, where finally the great designer found himself with a receptive audience for his plan to make motoring affordable for all. In time, Hitler duly claimed all the credit and renamed the Volks-wagen as the less catchy Kraft clurch Freude-wagen (KdF-wagen) (strength through joy car, representing the government department for leisure and the workforce).

For his part, von StauB put in place the management structure for this vast project, with representatives of BMW, Daimler-Benz, Auto Union, Opel and others all sitting in on the planning commission – truly, ‘Deutschland AG’ was out in full force.

Hitler laid the foundations of a new factory at the Saxon village of Fallersleben, and while the factory was under construction Porsche’s prototype KdF-wagens were built at Mercedes’ Sindelfingen plant. Then, just as the project was about to reach fruition, the Second World War happened – and ultimately another, altogether more crushing defeat for Germany.

After the war, the site at Fallersleben was among the first of Germany’s bomb-blasted factories to splutter back into life. Originally, the plan had been for the British occupying army to dismantle the factory and ship it back for one of its domestic motor manufacturers to use – but nobody in Britain believed that the car was viable. Neither did the Americans, which meant that the factory was handed back to the Germans, who renamed Fallersleben as the Volkswagenwerk and employed former Opel boss Heinz Nordhoff to manage operations.

A phenomenal success resulted. In total, 21,529,464 of Porsche’s air-cooled utility vehicles were built through 65 years of production, turning Volkswagen into a global automotive powerhouse – making the Porsche family a fortune. Anton Piech had taken 10 million Reichmarks out of Volkswagen in 1945 to establish Porsche as a manufacturer of Volkswagen-based sports cars, based initially at its wartime satellite works in Gmund, Austria.

After the war, Ferdinand Porsche was arrested for war crimes as a result of lobbying by the senior management of Peugeot. No verifiable charges were brought, but it was true that many of the labourers on Porsche’s wartime projects (as the head of weapons development) had been transported from Peugeot’s factories in occupied France. Many of them had been mistreated and a number of them had died.

Effectively, the aged Ferdinand Porsche was held to ransom and so Ferry Porsche and Anton Piech had taken on an array of clients to help fund their patriarch’s release. Most notable among them was a magnificent grand prix car, the Cisitalia 360, which featured four-wheel drive among its many innovations.

The family set up a Volkswagen dealership in Salzburg to be run by Louise Piech and Ferry Porsche began constructing a Volkswagenbased sports car, which would become known as the Porsche 356. Soon the firm would move back into the rubble-strewn ruins of Germany, in Stuttgart-Zuffenhausen, as the rest of the Fatherland’s automotive industry was slowly coming back to life.

Emil Georg von StauB had died in 1942 but the collaboration that he had fostered was not buried with him. Deutsche Bank was still heavily invested and so too was the Quandt family, who owned 10% of Daimler and 30% of BMW. In the 1950s the idea was tabled that the Bavarian operation should simply be swallowed up by Daimler but friction among the shareholders saw the Quandts save BMW from extinction by funding the Neue Klasse (new class) series of small but powerful executive cars, and eventually they sold their stake in Daimler to the Kuwaiti royal family.

All was less solvent in Saxony, home of Audi and the other components of Auto Union. The region was overrun by the Red Army in 1945 and, in the great partition of East and West Germany, the management and much of the workforce made a break to the West before the Iron Curtain fell. They established a new Auto Union company in Ingolstadt, building pre-war DKW designs.

These cars had little to offer against the Volkswagen and in the 1950s Auto Union looked doomed until Daimler-Benz bought it and the Ingolstadt factory was turned over for the production of Mercedes-Benz commercial vehicles. Mercedes scarcely needed the extra capacity, however, and in 1964 the Ingolstadt factory and all of the Auto Union brand names were bought by Volkswagen.

Initially it was the NSU brand within Auto Union that stole attention with its Felix Wankel-designed rotary engine and stylish Ro80 saloon – but the economy and reliability issues blunted its impact. Soon the Auto Union factory was producing Volkswagen-funded cars under the brand name of Audi, thus dividing the German motor industry into its great houses of Daimler-Benz, GM-Opel, Ford of Europe and Volkswagen, with their banner men of BMW making aspirational sports-saloons, Porsche making thoroughbreds and Audi making bread-and-butter cars with no fixed trajectory.

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