It’s not all love and roses between VW and Porsche, Who will be the controlling entity? Options

[Richard Casto]

I just saw this interesting news item...

http://online.wsj.com/article/BT-CO-20090503-702820.html

We all know Porsche bought heavy into VW recently. But now Porsche is carrying a good bit of debt that they have to service. There has been some speculation that VW may try a reverse acquisition of Porsche. I find it interesting that Ferdinand Piech is involved. For those of you who don’t know the history, Ferdinand Piech was in a senior management position (engineering and racing) at Porsche with his eyes on eventually running the company. Ferry Porsche and his sister, Louise Piech decided that the next generation of the Porsche family was not the right group to run the company, so they basically restructured the company so that no family members would be directly running it. Rather they would have a supervisory board made up of Porsche and Piech family members and non-family senior management.

This effectively ended the careers at Porsche for Ferdinand Piech and Ferdinand “Butzi” Porsche (the other potential heir to the Porsche throne). Neither would be allowed to run the company. Butzi left Porsche to start “Porsche Design” and Piech left to join Audi and eventually run VW. Ferdinand Piech retired from the VW board in 2002, but remains as the chairman of the Supervisory Board and still has considerable influence at both VW and Porsche. Ferdinand is pushing for VW to take over Porsche. I wonder if at 72 years of age he is still trying to achieve his goal of rising to the top in the Porsche family hierarchy and control the company.

[SLITS]

I would post "Who gives a rat's ass", but then that would be hostile.

[Richard Casto]

Just after I posted the above, I see this...

http://online.wsj.com/article/BT-CO-20090506-715329.html

Basically if I read this correctly, they are "merging" the two together. With Porsche being one of the brands. Frankly in my opinion this is not a merger of equals, but rather VW taking over Porsche. It's going to be interesting in many different ways.

[charliew]

You left out the guy that susposedly stepped in front of the train that was trying to get control of vw by shorting the stock. Then I think porsche ag bought enough vw shares and ran the price up enough that the guy couldn't support his position and was humiliated. As usual at the top it's just about greed and power not about the cars, the cars are just the toys in our lives.

[Richard Casto]

You left out the guy that susposedly stepped in front of the train that was trying to get control of vw by shorting the stock. Then I think porsche ag bought enough vw shares and ran the price up enough that the guy couldn't support his position and was humiliated. As usual at the top it's just about greed and power not about the cars, the cars are just the toys in our lives.

I think Porsche made like $8+ Billion on that deal. However that translated into about $11+ Billion in debt. Porsche has been planning on using VW money to service that debt. Wendelin Wiedeking (CEO of Porsche) has generally been the hero due to the turn around of Porsche in the mid 1990's as well as what started out as a good deal when they bought the VW shares. But now with the heavy debt load and the down economy he may get forced out during this merger.

[carreraguy]

Interesting development for sure! The global economic situation is even affecting Porsche and upsetting their grandiose plans! It will be worth following (out of curiosity if nothing else), so I'm staying tuned. Hope they can that four door monstrosity but realistically its too late now; at a minimum it will be a short lived model for sure and for all we know it may not even make it over here.

[914Sixer]

Doesn't Porsche own 49% of VW? Seems like they went shopping last year and bought up the State(Germany) percentage.

[Rick_Eberle]

Will this push the value of my Porsche up... or down??? (IMG:style_emoticons/default/confused24.gif) (IMG:style_emoticons/default/confused24.gif) (IMG:style_emoticons/default/confused24.gif)





Oh wait, it's a 914, so it doesn't matter. (IMG:style_emoticons/default/happy11.gif)

[Mikey914]

SO if VW owns Porsche I guess no one can saw it's not a real porsche anymore! (IMG:style_emoticons/default/aktion035.gif)

[maf914]

SO if VW owns Porsche I guess no one can saw it's not a real porsche anymore! (IMG:style_emoticons/default/aktion035.gif)

Or does it mean that all Porsches are now actually VW's? Oh, the humanity! (IMG:style_emoticons/default/laugh.gif)

[carr914]

Doesn't Porsche own 49% of VW? Seems like they went shopping last year and bought up the State(Germany) percentage.

Porsche owns 51%, they were aiming for 75%

T.C.

[GeorgeRud]

I believe that Porsche's acquisition of a large portion of VW stock was a quickly executed gotcha kind of move. They thought they won, but now they may be kicking themselves in light of the global downturn.

It's also quite possible that Ferdinand Piech is still pulling many strings, he's supposed to be quite smart (and arrogant), and I wouldn't put anything past him. He did a great job at Audi and VW!

[Richard Casto]

Piech continues to maneuver to get his way. Right now it looks like he is working on having VW come out on top with the HQ in Wolfsburg. Porsche workers are reported to be threatening to strike to show their dissatisfaction of the proposed VW merger/takeover. You may wonder why VW has the upper hand if Porsche owns more than 51% of VW. The problem is VW has cash and Porsche has a great deal of debt.

http://www.bloomberg.com/apps/news?pid=ema...id=a8qaQPfYEJXM

[DBCooper]

Then that wouldn't be a problem. If Porsche owns 51 percent of VW then they control the VW cash. All of it. Ever been a minority partner? That's why it's your accountant's duty to warn you whenever you start to think stupid.

[Richard Casto]

The soap opera continues...

http://www.bloomberg.com/apps/news?pid=206...id=aUfkV4Slo908

While Porsche technically should control 51% of VW, Lower Saxony (state within German) controls 20% and by a law that is commonly known as the “Volkswagon law”, Lower Saxony has a say in major decisions (such as a merger). Porsche had been counting on two things. First that Lower Saxony would allow the merger (either directly or by removal of the law) and second that they would use VWs cash reserves to pay off the 9 billion euro in debt that Porsche took on to buy all of the VW stock.

But that hasn’t worked out and that leaves Porsche with a bunch of VW stock and a huge loan that they can’t pay off. Porsche had a near death experience recently as it struggled to deal with the debt. The apparently came very close to bankruptcy. To remain solvent, Porsche had to borrow from whoever would loan money to them. Porsche had not made many friends in the banking industry when they manipulated VW stock (as part of the take over plan), so they have been having a hard time getting money. However VW did step up and loan Porsche some cash, but that also gave VW a strong hand with respect to future bargaining with Porsche.

Basically Porsche is between a rock and a hard place. With VW now having a strong position, they are pressuring Porsche to reach a deal. They are now going public with the pressure and Porsche is not happy about it. And the proposals are favorable to VW. Porsche is continuing to trying to find external funding (they have talked to the government of Qatar, the German government and some say even Daimler) so that they can improve their position prior to final negotiations. But so far they are not able to find the funding.