Porsche buys 20% of Volkswagen

Article in SZ

This is most unusual.

Typically, it 's the other way around, i.e. a large traditional car manufacturer buys a small sports car manufacturer, as e.g. Fiat/Ferrari etc. Porsche is the only sports car manufacturer that is 100% privately owned (it is still owned by the inheritors of Ferdinand Porsche).

A lot, if not everything, has to do with Wendelin Wiedeking - he is an extraordinary man and Germany's most successful top executive. He became CEO of Porsche when he was just 40 years old and resurrected Porsche from almost bankruptcy to what currently is the most profitable car manufacturer in the world.

It was often gambled that Wiedeking might move from Porsche to VW and become CEO there – not necessary anymore: being the largest share holder, Wiedeking will be something like the lurking CEO of VW. Class move by a class guy imho, a true captain of industry.

truely one of the best ceos in major business in the world. believes heavily in caring for his workers. now that dont happen much these days.

It’s the so called 'German solution'...where German companies prevent their kind from a hostile takeover….VW was being eyed by some LA hotel magnet...

Many Germans companies such as Allianz, degussa, hypo bank etc are on line to be acquired ...lets see how much can the Germans salvage…alles über deutschland

This is a very old business practice in Japan, too.

Just to point out a couple of things.
1. Porsche already owned 5% and is protecting its own interest by increasing its atake to 20%. VW Make the Chassis for the Cayenne.
2. Porsche is a publically listed company so is not priavctely owned
3. Porsche shares were down as much as 11% on the news whilst VW were up about 8%

If I owned shares in Porsche, I'd be seriously pissed. They're wasting their cash buying VW shares when they could be paying me dividends or investing in something more productive. If Porsche shareholders had wanted to invest in VW they could have done it themselves. This will most likely go down as a horrible decision.

It depends - such a move only makes sense if there are economies of scale - such as joint ventures like the Cayenne. A small highly profitable operator like Porsche could help to take VW upmarket in which case massive gains could arise.Issues such as controlling interests come to the fore here.
Bottom line: too early to say but there is considerable upside potential.

Apparently they have syome other collaborations still in the design stage and any hostile take over from another competitor could put them in Jeopardy.
At the end of the day Porsche are looking after their own interests although the markert seems not to agree

Good point. So why does it say in the SZ article:

thats where the VW group are already fucking up with canabalisation of their own different markets and unclearly defined products. add porche to an already very undefined product range and its going to be a desaster. imho.

@Rus

From what I read this morning, it's probably more than looking after their own interests. It's seems that Porsche's CEO is not a fan of anglo-saxon style capitalism and it's rumoured that he doesn't want to see VW torn apart by "foreign investors". Of course the points mentioned about the shared Cayenne platform are certainly valid although it's a little difficult to understand why Porsche would go those lengths and spend that kind of cash to protect their own interests when it's not even clear that even if VW were to be involved in a hostile takeover that the new owners would put an end to the collaboration with Porsche.

@Olli

You guys are both right. Porsche is indeed publicly listed because their stock does trade on the DAX. Porsche is however 100% in family hands because its listed stock is preferred stock and therefore has no voting rights.

Thanks Ketchup, that explains it. Incidentally, their stock is not on the DAX. It used to be on the MDAX but in 2001 they got chucked out when they refused to file financial reports each quarter, instead of twice a year. So they are publicly listed, but not part of any index. All the same to them, they outperformed the MDAX anyway.

I'm wondering if this might be a good opportunity to buy. Currently Porsche stocks are down almost 10%. With the Cayman coming this Fall, I'm sure they'll pick up soon.

Quite right. They were kicked out of the MDAX index. I should have said that they are traded on the XETRA Frankfurt and also Stuttgart exchanges but are no longer included in any major indexes.

i watched cnbc europe the other day and they were talking about the porsche-vw-deal.
this one guy in london-high-street was kinda complaining about british businesses, cause they don't have those sort of "special bonds". he was mentioning germany, france and italy, saying that these countries still have businesses with family ties, helping each other out, being protective.
acc. to him, there's a lack of responsibility in the uk reg. core businesses like the lse. brits tend to think "highly capitalistic and liberal regarding their own market economy", but other countries like france, germany and italy tend to think in a more national way, france being the first country to suggest to protect its core business sectors like energy, defence or resources.
germany has made first steps as well, having set up boundaries for hedge funds and private equity companies...and speaking of italy...whoa, has someone read something about the abn amro - antonveneta deal?...nuff said...they kick ur *** if u just mention stuff like "buyout" or "equity".

what do u guys make of that?

btw, the guys' name is stephen sedgewick or something like that, he runs "today's business" on cnbc. (just if u wanna blackmail hin or sumthin'... )

p.

An interesting view of the deal.
I love the thought of having these chaps back in F1 (as described by the linked article, not this quote)


Porsche takeover of VW???

Historically, VW and Porsche were always somewhat linked, also in terms technology. The legendary Beetle was designed by F. Porsche himself, and the typical boxer engine powered all VWs thru to the Golf era (Karman-Ghia, 411/412 etc.). There was also a co-produced car VW/Porsche 914 in the early 70s.

However, the rear air-cooled boxer engine seemed a dead-end concept, also for Porsche, which is why they introduced front engine cars (924, 944, 928, 968) and in the long run these were supposed to replace the 911 concept altogether.

As it turned out, the front engine Porsches sold comparatively badly inspspite of being technologically superior, and Wiedeking recognized that it was the concept of the 911 which the market wanted and what people associated with Porsche - so along came the Boxster and a revised 911 (996), followed now by yet another model of similar concept, the Cayman.

Porsche is now increasing their share value to 30.9%, which will make them the largest share holder. This would indeed put them back into a similar situation as in the 1930s, when Porsche created the "Volkswagen" and owned the company.

I find this interesting with respect to the history of the two companies:

Dr. Ing. h. c. F. Porsche founded Porsche Car & Engine Manufacture GmbH in 1930

In 1934, the Nazis requested Porsche should manufacture a "Volkswagen" that should not cost more than 1,000 Reichsmark.

1938, Porsche founds the "Volkswagenwerk" in Wolfsburg (town name at the time was Fallersleben). This was Europe's most modern car plant at the time. Due to the following war, the Volkswagen production didn't really take off, as most resources went into the arms industry.

After the war Ferdinand Porsche founded the Porsche AG in Stuttgart. The "Käfer" (Beetle) was constructed on the basis of the pre-war Volkswagen, and it became the best-selling car of all times, it was built for around 4 decades with only few changes to it.

Ferdinand Porsches son, "Ferry" Porsche, went on to turn the company into a respected manufacturer of sports cars. Ferdinand dies in 1952, and his daughter Louise Piëch leads the company until 1972. Her son Ferdinand Piëch later becomes CEO of Volkswagen, and today is head of the board of directors there. Piëch is also a member of the board of directors of Porsche AG and owns 10% of the shares.

To this day the Porsche/Piëch family largely controls Porsche AG and also plays a major part at Volkswagen. They are not only linked financially, the cars also share common construction even today (e.g. the Porsche Cayenne and the VW Touareg). Researchers of both companies are currently working together on the construction of a hybrid engine.

The Porsche/VW deal isn't finalized yet, but in future Porsche will have more say at VW, quite likely take over the company entirely. To do that, however, the "VW Gesetz" must be abolished, which says that no matter how many percent a shareholder owns, he cannot have more than 20% of votes. This law was introduced to prevent a possible hostile takeover by a foreign company. Presently Porsche has brought the case to the European Court. Should the court decide this "VW Law" is illegal, Porsche is free to take over VW.

I don't wish to hold a monologue in this thread, but there is one more small thing:

Will whoever changed the thread title today please change it back. The company in question is not, was not, and never will be called "Volkswagon"

so far, everyone on this thread has missed the real motivation as to why Porsche would want to buy Volkswagen. Think about what has been hitting the headlines recently. CO2 emmissions, innit. Porsche would be up shit creek without a large group to even things out. Volkswagen was simply the logical choice (nice historical links to hark on about to justify it to shareholders) and the VW-Gesetz was going to be declared illegal by the EU sooner or later, so who better to prevent a hostile takeover than a nice solid German company. Both sides win.

Sage words - though I think they should have bought FIAT. Doing much better on the CO2 front.
Edit: and a 3.6 litre Porsche engined Panda would kick arse.

According to the BCC (I thought this gives some resonance to the "Volkswagon" in the thread title) Porsche is still planning to buy Volkswagen.

It seems more than obvious why Porsche is taking over VW. Porsche is surprisingly full of VW parts. With the threat of VW being taken over by someone else this would threaten Porsche´s supply chain hence the backward integration. Secondly, Porsche is probably folllowing the same strategy BMW is trying to follow. They both spend heaps on R&D, but don't have the volume to get the large investments back. BMW is looking at working together with General Motors afaik - if I remember correctly share their gearboxes with them - and Porsche is probably going to use VW. Also makes sense since both companies are German hence their cultures are similar. I think everyone has learnt their lesson from BMW-Rover & Daimler-Chrysler...

plus EU rules on emmissions mean the average CO2 produced by a companies cars is measured and they may be charged if above a certain amount. BMW created the 1 series and have the mini to bring the average of the 6 and 7 down. Porsche need small cars to offset the big ones. No one wants a little, slow Porsche, so buy VW and average a cayenne with a lupo.

probably

Slightly off-topic but the new 911 Carreras announced in the last days already meet EU5 emission standards. The standards are not due to come into force until late next year.

BMW has co-operations with many companies (PSA for engines with MINI; Daimler for Hybrid technology) and are exploring new ones all the time. BMW also supplies parts to Porsche from the Eisenach plant.