Porsche Plans to Acquire Stake in VW

[Buick61]

By GEIR MOULSON, Associated Press Writer

BERLIN - Luxury sports car maker Porsche AG said Sunday it plans to acquire a stake of about 20 percent in Volkswagen AG, a move aimed at strengthening ties between the automakers and preventing a future hostile takeover of Volkswagen.

Porsche said Volkswagen had become "a significant supplier for about 30 percent of our sales volume," as well as "an important partner in development."

The two companies worked together to develop Porsche's Cayenne sport utility vehicle and Volkswagen's Touareg. They recently announced that they, along with Audi AG, were forming an alliance to develop hybrid engines.

"With this engagement, we want to secure our business relations with VW and also safeguard in the long term a significant part of our future planning," Porsche chief executive Wendelin Wiedeking said in a statement.

Stuttgart-based Porsche said it hoped the investment would enable it to head off any future hostile takeover of Volkswagen by investors "who do not have the long-term interests of VW as their aim."

That scenario could arise if the European Court of Justice rules against a German law that effectively protects the company, Europe's largest automaker, from such a takeover.

"Our planned investment is the strategic answer to this risk," Wiedeking said. Porsche said it was in contact with Volkswagen's management.

"This 'German solution' that we are seeking is a significant precondition for the stable development of Volkswagen AG" and for the two companies' future cooperation, he said.

Porsche said it was in contact with Volkswagen's management and did not plan to take over the company. Volkswagen welcomed Porsche's move, which it said supported its "independent business policy."

"A stable shareholder structure is very important" in the long term, it said.

The European Commission took Germany to court last year over the VW law. It has long argued that the decades-old law goes against the grain of the 25-nation bloc's single market principles, although German politicians claim it helps ensure stability at the company.

The Commission objects to provisions of the 1960 law privatizing Volkswagen that cap a shareholder's voting rights at 20 percent, regardless of the number of shares held, and requires a majority of 80 percent for "important decisions."

The state of Lower Saxony, where VW's Wolfsburg headquarters is situated, is currently the biggest shareholder, with a stake of 18.2 percent.

A 20 percent stake would currently cost Porsche more than $3.6 billion. Porsche said it could finance the purchase with "available liquidity," but did not elaborate.

Porsche said its investment would not reach the 30 percent threshold that, under German law, would require it to make a public takeover offer for Volkswagen.



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[ChevroletRevived]

Hmm...interesting.

[2005 Equinox LS]

They might as well do it. Porche has long ties to VW going way back. I am surprised Porche has that kind of money to do this. Maybe the new SUV is bringing more money than expected?

[ricers-shaft-big3]

thats surprising! i always though that porsche was tiny!

[56 Starchief]

Porsche has come a long way since the 90s when they faced extinction i guess

[Whirling_Dervish]

Originally Posted by 56 Starchief

Porsche has come a long way since the 90s when they faced extinction i guess

Perhaps the highest profit margins in the business.

[mjd1001]

Probably a good move with good timing. In good economic times (like the late 90' to now), niche auto makers and high end auto makers generally do well. However, when an economy turns south, they don't do as well.

Putting all political views aside and strictly focusing on the business cycle, it's good for Porsche to be purchasing a stake in a more "entry level" automaker for when times may not be as good.

[pkd87]

Now even though VW is strapped for cash I thought it would be the other way around.

[paul3230]

Originally Posted by 56 Starchief

Porsche has come a long way since the 90s when they faced extinction i guess

Porsche faced extinction??? I didn't know that.

[awalbert88]

This is not a surprising move in my view. Porsche has money thanks to Cayenne. VW is a big parts supplier and development partner for them, and is in serious danger of being bought out by foreign investors should the EU get its way (and it likely will, as Germany won't secede from a union it helped create). Although to be honest, I'm not sure who would look at Volkswagen as a good investment, since Ford and GM are both out of the acquisition business, and Toyota has repeatedly laid claim that they will dominate the world without buying out competitors. DCX is having enough troubles of its own right now. Hyundai would be a logical choice, though I admit to being clueless as to their balance sheet right now. With Hyundai's growing reputation for quality, a merger with VW would likely give an even bigger boost to their capacity and lineup, although they would have to do a lot of work to get that company producing quality product again.

In the end, though, I think VW is going to wind up being dissolved into a much smaller company that will be partially owned by a couple of manufacturers, Porsche among them. Unless of course they get the quality/cost situation under control.

[Cortazzo]

it is the right time to buy considering all of the scandal and quality problems VW's been facing, their share prices are at a significant discount historically. Same for GM and Ford, kerkorian is no fool for buying up as much as he can.

[Whirling_Dervish]

Originally Posted by Cortazzo

it is the right time to buy considering all of the scandal and quality problems VW's been facing, their share prices are at a significant discount historically. Same for GM and Ford, kerkorian is no fool for buying up as much as he can.

VW was in danger of a hostile takeover by a foreign interest....think someone in Japan. This would hurt Porsche also given the sharing on the Cayenne and upcoming Panamera. So to protect their interests Porsche jumped to buy in.

[Phillip]

Originally Posted by Whirling_Dervish

Perhaps the highest profit margins in the business.

Right along with BMW...

[TheBar2k]

Originally Posted by pkd87

Now even though VW is strapped for cash I thought it would be the other way around.

Perhaps Porsche could buy SEAT and enter the entry level market and bring the brand to new levels?

[Whirling_Dervish]

Originally Posted by TheBar2k

Perhaps Porsche could buy SEAT and enter the entry level market and bring the brand to new levels?

SEAT may not be alive in the near future. They are VW's version of Daimler Chrysler's Smart brand, ie. not making money....ever.