Porsche pulls handbrake on VW takeover

PREMIUM sportscar-maker Porsche today waved the white flag on its expensive attempt to take a 75 per cent stake in Europe’s biggest motor company, Volkswagen Group, and instead initiated merger talks with the German giant.

Porsche and VW today jointly announced plans to negotiate on a blueprint to create a new joint umbrella company, signalling a truce in the feud between Porsche and Piech family members over the future of the conglomerate they control.

The new parent company will sit above the group’s 10 automotive brands – VW, Porsche, Audi, Skoda, Seat, Bentley, Bugatti, Lamborghini, Scania and Volkswagen Commercial Vehicles – each of which will be run independently.

Porsche SE has spent about €23 billion ($A40.5 billion) buying 51 per cent of VW, leaving it with a debt of €9 billion ($A15.87 billion) and plenty of potential to run into difficulty servicing the interest.

The decision to broker a merger came in truce talks in Austria at Salzbburg yesterday, and is seen as a win for Porsche chief executive Wendelin Wiedeking and Porsche chairman Wolfgang Porsche – despite the fact that Wiedeking drove the takeover strategy.

Left: Porsche chairman Wolfgang Porsche. Below: VW chairman Martin Winterkorn.

A Middle Eastern investor, thought to be from Qatar, was said to be interesting in buying a chunk of the VW/Porsche group, but there was no mention of any such move in the official statements from Wolfsburg and Stuttgart today.

Ferdinand Piech, a cousin of Wolfgang Porsche, had put forward a counter proposal under which VW would take over Porsche. He was also reported to be gunning for Wiedeking to replace him with VW chairman Martin Winterkorn.

However, when the dust settled, Porsche AG and Volkswagen Group simultaneously announced that merger talks would be held over the next four weeks.

In its statement, Porsche Automobil Holding SE said VW and Porsche had been in intensive talks over “deepening of the co-operation” in recent weeks.

It said the family shareholders of Porsche had argued for the creation of an integrated car manufacturing group.

“In the final structure, 10 brands shall stand below an integrated leading company alongside each other, whereby the independence of all brands – and explicitly of Porsche – shall be ensured,” the statement said.

VW AG said in its statement that it welcomed the decision by the Porsche and Piech family shareholders to create the integrated group under which each of the 10 brands would retain its independence.

“In the next four weeks, a joint working group whose members will come from Volkswagen and Porsche will consult intensively with the state of Lower Saxony and the workforce of both companies to prepare the basis for a decision on the future structure,” it said.

Thanks to fresh new mainstream models and European government “scrappage” incentives for new-car buyers, Volkswagen Group has suffered less than most of its international competitors in the global financial crisis.

After surging past Ford in sales volumes last year, VW Group seems set to oust General Motors from second place behind Toyota, whose sales have slumped this year in key markets, including Japan, the US and China.

However, Volkswagen’s profit has been hammered with a 74 per cent drop this year, and it would have recorded a loss itself had it not been for selling its Brazilian commercial vehicle business to German truck-maker MAN for €600 million ($A1.1 billion).

The bottom line for VW, Europe’s largest car-maker, is that it made €243 million ($A448 million) in the first quarter compared with a €929 million ($A1.7 billion) profit in the first quarter of 2008 as sales dropped 16 per cent to 1.35 million units.

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