Porsche's family owners yesterday settled months of feuding over a rescue of Germany's debt-ridden sports car maker by agreeing a merger with Volkswagen and ousting its chief executive Wendelin Wiedeking with a huge €50m ($71m) pay-off.

The merger, which is planned for 2011, would bring Porsche under the umbrella of Europe's biggest car and truck empire, where it would join other famous marques including Audi, Bugatti and Bentley.

But the terms of Mr Wiedeking's pay-off, one of the biggest ever in Germany, reignited a fierce public row over executive pay in the country, which is heading towards a general election in two months time. One of the best paid managers in the world, Mr Wiedeking was accused by one politician of “cashing in big time”.