Porsche and Volkswagen Showdown is Looming

Posted by: David Kiley on July 7, 2009

Top management of German auto companies Porsche AG and Volkswagen will come to the table in the next two weeks to discuss an investment by the Qatar sovereign wealth fund and how that could possibly strengthen Porsche’s bid to takeover Volkswagen AG.

Porsche CEO Wendelin Wiedeking has been pursuing a strategy of trying to acquire control of VW since 2005 when he first bought a stake in the larger company. That strategy blew up in the CEO’s face, though, last Fall when the global capital markets tanked and Porsche got caught holding risky derivative investments it was using to finance its acquisition of VW.

The dealings between Porsche and VW have taken on a soap-opera-like quality. The VW supervisory board chairman is Ferdinand Piech, the great grandson of Ferdinand Porsche. His family is also part of the controlling stakeholders in Porsche.

The Porsche and Piech clans have long been rivals. At one time, it was believed that Piech and Wiedeking were working in concert to have Porsche acquire VW. But in recent months, Piech has been openly critical of Porsche’s moves and its excessive debt.

Piech, as a significant Porsche shareholder, can, in fact, block the Qatar investment. Qatar is looking for voting shares in Porsche in exchange for investing billions. Up to now, the Porsche and Piech families have controlled all the voting shares.

If Wiedeking is blocked, and the Qatar investment doesn’t go through, there is the strong likelihood that he will be ousted as CEO and that Porsche will be absorbed by VW. It would be a spectacular fall of one of Germany’s leading industrial executives. Wiedeking has been CEO of Porsche since the early 1990s and led the sports car company to be the most profitable, as measured by operating margin, auto company in the world.

Porsche currently owns 51 percent of VW.

Wiedeking has so far failed to secure 1.75 billion euros in loans it wants from commercial banks or from KFW, a state-controlled bank in Germany.

Qatar is approaching a potential investment in Porsche as a passive financial investor and is apparently open to investing in either company.

Reader Comments

micha

July 7, 2009 3:53 PM

HI: I hope VW creams porsche and takes over... I had tow Porsches and five VWs and the VWs were the better of the lot. Long live VW

CM

July 8, 2009 8:58 PM

Volkswagen is the original company from which Porsche was born. Its ownership of the smaller Porsche specialty car maker will bring things back in order.

Werner

July 10, 2009 5:56 AM

Its a case of David vs Goliath.If Porsche are succesful they'l become more than just a company that sells luxury sports cars, they should almost be viewed as a hedge fund. Goodluck Porsche

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