Porsche VW update on the news

Historic German tie-up beckons

The top boards at Porsche and Volkswagen are to meet separately on Thursday in a bid to replace acrimony with a historic alliance.
At the meetings, offers based on two industrial strategies and backed by the two clans will go head-to-head. Investment by Qatar is a central issue, and in the background rumours of key resignations swirl. VW will be first off the line, starting its special meeting of the supervisory board at 1000 GMT at Stuttgart airport, southwestern Germany, with Porsche following four hours later at its headquarters in Stuttgart. The agendas cover the futures of the two groups, which have been closely linked since January when Porsche acquired almost 51% of the shares in VW, the biggest auto maker in Europe. Porsche, burdened with about 10 billion euros (14 billion dollars) in debt, had to abandon in May a plan to take full control of VW and its big cash pile, and must now find other sources of financing.

"We will know the solution on Thursday," the regional premier of Lower Saxony, Christian Wulff, forecast last week. The northern German state is home to VW and owns 20% of its equity. VW declined to comment when contacted by AFP, but both companies remain prudent with respect to what might emerge from the meetings. "We will see at the last minute," an industrial source said. A Porsche spokesman added: "We do not know what the family will decide. We are going with the idea that there could be a decision. But we cannot expect one."

Landmark
All of Porsche's voting rights are owned by the Porsche and Piech families. The spokesman also noted that Porsche had a regularly scheduled meeting of the board one week later. The two meetings could be a landmark for the German auto industry. On one side, Porsche boss Wendelin Wiedeking is pushing for Qatar to buy a stake in the company along with VW stock options owned by Porsche, allowing the maker of the 911 sports car to retain its independence. On the other, the head of VW's supervisory board and major Porsche shareholder Ferdinand Piech wants his group to buy Porsche's core automaking activities amd make it the group's 10th brand.
Qatar could take a stake in the combined group under that scenario. It is up to the two families to decide, led by Wolfgang Porsche, who is said to back Wiedeking, and Piech. German media, meanwhile, have recently reported a flurry of rumours from unidentified sources about Wiedeking's imminent resignation.

Tarnished images
Porsche has rejected the speculation, while Wiedeking told the magazine Cicero in comments to appear on Thursday that he would not "accept that Porsche is taken for a ride in the end." The Porsche boss is backed by the head of the company's works committee, union leader and former boxer Uwe Hueck. "We made the Porsche and Piech families rich," Hueck was quoted in press reports as saying. "We turned them into billionaires with our work, and now they want to sell us. "We are going to fight, by all means possible," the union leader warned. The image of Porsche and VW have been tarnished by months of haggling as both are slammed by the global automobile crisis, and a strike at Porsche would undermine VW management in the event of a takeover. "Let's try to untangle the knots on Thursday to Porsche and Volkswagen can take on the competition and concentrate on making automobiles," Wulff suggested on Monday.

Any deal to sell Porsche Automobil Holding SE's sports car business to Volkswagen AG could be canceled by potential tax liabilities, a German newspaper reported today, knocking shares in the two German companies. The Sueddeutsche Zeitung cited sources close to Porsche's supervisory board as saying taxes of 3 billion euros ($4.3 billion) that would go along with any takeover could become a deal-breaker.
Porsche and Volkswagen declined to comment on the report.

Volkswagen's ordinary shares were down 9.2 percent to 227.03 euros by 1217 CET, making them the biggest decliners on the German blue-chip index, while Porsche fell 7.9 percent to 47.80 euros on fears its debt problem may not be solved. There have been reports the Porsche family that controls a majority of Porsche SE will give in to demands by rival family shareholder Ferdinand Piech to reduce the company's crushing debt by firing CEO Wendelin Wiedeking and selling the sports car unit, Porsche AG, to Volkswagen. The automaker and its deputy board member, Uwe Hueck, have repeatedly denied reports that Wiedeking is negotiating a severance package of more than 100 million euros. They also deny that Wiedeking's successor has been found. The Sueddeutsche story comes ahead of board meetings at both automakers in Stuttgart on Thursday that could determine the future of the two companies. "Three billion euros is quite a bit of money and could put the entire business structure in question," a Frankfurt-based trader said. German magazine Der Spiegel reported over the weekend that the Porsche and Piech families would agree on Thursday to accept an offer by Volkswagen to buy Porsche AG for roughly 8 billion euros.

Wendelin Wiedeking, chief executive at German sportscar maker Porsche will fight for his company and its staff if it merges with Volkswagen, he said in an interview to be published on Thursday. "In total agreement with the (controlling) families, we set a goal of creating an integrated group with Porsche and VW," Wiedeking told the German monthly Cicero. "I think it is legitimate for each side to try and get the most out of it," he added. It was imported to remember, however, that "it was the management and staff of Porsche that furnished the financial means to create a Porsche-VW alliance," Wiedeking stressed. He said he would not "accept that Porsche is taken for a ride in the end." A growing number of rumours and reports based on unidentified sources have recently said Wiedeking would step down as Porsche CEO. The supervisory boards of both Porsche and VW are to meet separately on Thursday in Stuttgart.Porsche might be integrated into VW, with Qatar also taking a stake, but with the combined group remaining under the control of the Porsche and Piech families. Wiedeking opposes this plan while it is backed by Ferdinand Piech, head of the VW supervisory board.

Porsche SE's controlling families will agree on Thursday to accept an offer by Volkswagen to buy its sports car business Porsche AG for roughly 8 billion euros ($11.28 billion), Der Spiegel reported on Saturday. Germany's leading weekly magazine wrote that the rival Porsche and Piech clans, which own 100 percent of Porsche SE votes, will approve the two-stage takeover at a supervisory board meeting on July 23.
Volkswagen would purchase a 49.9 percent stake in Porsche AG and at a later date acquire the rest, in a deal that would create an integrated automotive group with 10 brands under the leadership of the Wolfsburg-based carmaker. The sale would help Porsche SE pay off most of its debt, which two sources told Reuters has ballooned to considerably more than 10 billion euros.Der Spiegel also said embattled Porsche SE and Porsche AG CEO Wendelin Wiedeking is negotiating over a severance package that could total more than 100 million euros. In the meantime, production chief Michael Macht will replace him as head of Porsche AG, the magazine reported.

On Thursday, Wiedeking rejected speculation he was about to leave the group.

Asked on Saturday whether the two families have reached a decision for the July 23 board meeting, Porsche spokesman Anton Hunger said "we have not been informed of one," adding that the Spiegel report was speculation that the company would not comment on. Separately rival German weekly magazine Focus reported that Volkswagen's powerful chairman and part-owner of Porsche, Ferdinand Piech, plans to remove Wiedeking on Thursday from the influential six-man steering committee on the VW supervisory board. The vacancy could open up the opportunity for Piech's cousin and rival, Wolfgang Porsche, VW supervisory board member and Porsche SE chairman, to replace Wiedeking in the committee as a representative of his side of the family. The grandfather of Wolfgang Porsche and Ferdinand Piech was Ferdinand Porsche, designer of the Beetle and founder of Volkswagen.

Brand is an important thing to a major company; car companies might even be the kings of the branding thing. And this week, the world is seeing just how far Porsche will go to retain its identity as sports car king as it attempts to fight off the VW takeover. By most accounts in the media, Uwe Hück, head of Porsche’s works committee is not happy about Volkswagen’s impending takeover of Porsche. It is being reported in the German media that various workers from Porsche are planning to strike in order to disable production at the Porsche plant.
According to The Local and the Bild, Hück has been reported as saying “You can’t make a Porsche out of Polo parts.”

The Bild, also reported that Hück accused Minister President Christian Wulff of Germany’s Lower Saxony of wanting to do Porsche in. The Minister President’s supposed reasoning? “Wulff wants to destroy Porsche, so that VW can buy us out cheaply,” Hück said. These accusations are just the latest round in the fight between Volkswagen and Porsche for King of the Mountain status. Porsche’s woes began because of a “misguided attempt to takeover VW”, according to The Local. The resulting debts for the sports car maker were staggering forcing it to seek a bail out of sorts from Arab Emirate Qatar to the tune of €9 billion. Hück accused Ferdinand Piech, head of VW and co-owner of Porsche of not caring about the jobs of the 11,000 workers at Porsche. The Local reported that “Porsche workers have made galactic profits in the last 14 years, and will now fight galactically for independence,” Hück said. The employees have another plan for Porsche. The Local went went on further to quote the Sueddeutsche Zeitung by saying they want Piech and the Porsche family to invest €2.5 billion in the company, a further €2.5 billion should come from other shareholders, and then the rest could be provided by an outside investor.
Next week the boards of directors for both companies are planning to meet to discuss the particulars of the takeover. Expected to be included in the talks is the compensation package for Porsche CEO Wendelin Wiedeking. Wiedeking is expected to leave Porsche soon. He reportedly earned an estimated €77 million. According to some media reports, that could mean a payout of up to €100 million.
According to Süddeutsche Zeitung Wiedeking’s job is in danger, although this has been denied in some media reports.

German luxury car maker Porsche announced on Thursday the resignation "with immediate effect" of its chair Wendelin Wiedeking and financial director Holger Haerter.

In a statement the Stuttgart-based firm said an agreement on the resignations had been reached with the supervisory board, and that Wiedeking - said to be the best-paid executive in Germany - will get a golden handshake worth €50m ($71m), with half that sum going to a "social foundation".

Porsche's current production chief Michael Macht is to succeed Wiedeking, who together with Haerter, was the architect of Porsche's bid to take over Volkswagen, Europe's biggest automaker.

MUNICH-Talks to strike a deal over the future of Porsche are heating up as rival factions race toward an expected showdown today. Porsche Automobil Holding SE is pitted against Volkswagen AG, which has offered to buy Porsche SE's sports car making business to reduce the holding company's massive debt. The Porsche and Piech families, which control all the voting shares at Porsche SE, have been at loggerheads for months over how to resolve the holding company's debt woes and determine the role VW would play in Porsche's future. Porsche SE amassed debts of billion of euros during a failed attempt to take over VW that left it with a stake of nearly 51 percent in Europe's biggest carmaker. VW has offered to buy Porsche's sports car business for 8 billion euros ($11.37 billion at today's exchange rates), according to German press reports. A sale of Porsche's sports car business to VW would help Porsche SE pay off most of its debt, which sources have said stands at more than 10 billion euros ($14.22 billion). Porsche CEO Wendelin Wiedeking has been pushing a possible deal with Qatar that would give the Gulf state a 20 percent stake in Volkswagen via Porsche's derivative contracts.

Separate meetings
Today, the supervisory boards of Porsche and VW hold separate meetings in Stuttgart, the home of Porsche. VW's board meets at noon CET while Porsche's board meets at 4 p.m. A plan by VW Chairman Ferdinand Piech, a part owner of Porsche, to make Porsche VW's 10th brand likely will be approved by the VW board with backing from representatives from Lower Saxony, which has a 20 percent stake in VW, and employee representatives, who fill half the seats on the board. Piech's cousin, Wolfgang Porsche, Wiedeking and Porsche Chief Finance Officer Holger Haerter, who are all members of the VW board, will speak out against VW buying Porsche, German press reports say. Piech and Wolfgang Porsche will again be at loggerheads a few hours later at Porsche's board meeting, where board members will discuss selling a stake in Porsche to Qatar. Piech likely will oppose that proposal. He can count on support from VW's union boss Bernd Osterloh and Audi's union leader Peter Mosch, who also are members o the holding company board.

Stuttgart - Europe's biggest car marker Volkswagen vowed Thursday to take over German sports car icon Porsche, its main shareholder, as VW cranked up a campaign to challenge Japanese rival Toyota.

VW also said the Gulf emirate of Qatar would buy 17% of VW shares amid a broadside of news that rocked the German auto industry and served notice to international competitors, especially recovering US giant General Motors.

The developments emerged from an epic corporate boardroom battle that fuelled a caustic family feud and left Volkswagen standing tall.

But its ultimate shareholder structure and management team were still in suspense.

Nevertheless the deal leaves VW a small step closer in terms of vehicle sales with world number one, Japanese giant Toyota.

VW wants to overtake Toyota by 2018 and could pass US behemoth General Motors this year to become number two worldwide as GM emerges from bankruptcy and slims down in an effort to survive.

Porsche chief executive Wendelin Wiedeking, the principal victim in the struggle, said he would step down after losing a long battle against VW supervisory board president Ferdinand Piech for control of both companies.

"We have opened the way ... to the creation of an integrated group," VW chief executive Martin Winterkorn said following a meeting of his group's supervisory board in this south-western German city.

Munich - Porsche conceded a months-long power struggle to Volkswagen by axing its CEO Wendelin Wiedeking and finance chief Holger Haerter.

The sports car maker also said it would raise at least 5 billion euros ($7 billion) in equity as VW and Porsche prepared for a merger.
After an all-night meeting of its board of directors, Porsche said Wiedeking, 56, Germany's best-paid executive and its CEO for the past 16 years, along with Haerter, 53, would quit the group immediately.

Porsche's production chief Michael Macht, 48, will replace Wiedeking. Thomas Edig, 47, head of human resources, will be his deputy, the company said.

Wiedeking has accepted compensation of 50 million euros. Haerter will receive 12.5 million euros.

Wiedeking had opposed selling Porsche to Volkswagen, which would have helped the company reduce the debt he had run up in a failed attempt to take over VW, which is 16 times Porsche's size by revenue.

Wiedeking became Porsche CEO in 1992 and turned the company from a bankruptcy candidate into the world's most profitable automaker before the economic crisis hit. But he was brought down by his ambitious attempt to take over Volkswagen, Europe's largest automaker.
10 billion euros in debt
Porsche's holding company amassed debts of more than 10 billion euros buying a 51 percent stake in VW. The debt became difficult to service as Porsche's car sales plunged during the downturn and the company hit difficulties agreeing on refinancing packages with banks.

The meeting of the non-executive directors, which include the Piech and Porsche families that between them control Porsche, approved Wiedeking's proposal to raise fresh equity -- either in cash or through a contribution in kind -- and endorsed talks to sell a stake to the Gulf state of Qatar.

"This should lay the foundations for the creation of an integrated automobile group consisting of Porsche SE and Volkswagen," Porsche said

Porsche Automobil Holding SE axed its CEO and said it will seek at least 5 billion euros (about $7.1 billion) in fresh funds, setting the stage for a merger of the German sports car maker with mass-market rival Volkswagen AG.

Here are the vital statistics of the two carmakers:
• VW posted annual sales of almost 114 billion euros, more than 16 times Porsche's approximately 7 billion euros.*
• VW sold 6.27 million cars last year, more than 70 times the 87,000 cars delivered by Porsche.*
• VW has 370,000 staff globally vs 12,800 for Porsche
• VW's market value -- bloated by speculation that Porsche will buy more of its stock -- stands at more than 70 billion euros. Porsche's listed preferred shares are worth around 3.6 billion euros, but this excludes the unlisted voting shares held by the Porsche and Piech families.

• Porsche's stable of models is made up of the 911 sports coupe, the Boxster cabrio and its hardtop Cayman variant, the Cayenne SUV and the Panamera luxury sedan, with market launch slated for January 2010. It has plants in Stuttgart-Zuffenhausen and Leipzig in Germany and uses an assembly plant in Finland.

• VW's brands comprise the namesake VW hallmark on passenger cars, vans and light trucks, Audi, Skoda, Seat, Bentley luxury cars, sports car brands Lamborghini and Bugatti as well as Scania trucks. It has 61 plants in 21 countries including Germany, Spain, Brazil, China and Italy.

* Porsche's sales figures are based on the 12 months through January 2009, taken from its financial reports. VW sales figures are from the company's 2008 annual report.

interesting. Way forward?

I think it is the way forward for VW however it would not make a difference to them they already own a number of sports car manufacturers.

Lamborghini
Seat
Bentley
Bugatti
Audi

However from a Porsche side i think it is Bad, they are the last of the dying breed...
The last independent sports car manufacturer

Volkswagen is considering a capital increase as one option among many to finance its takeover of debt-laden sports car maker Porsche AG, bankers familiar with the situation said.

Issuing any fresh voting shares is seen as a problem however, since it would dilute the 20 percent voting stake owned by the German state of Lower Saxony, wiping out its blocking minority.

VW ordinary shares were down 1.9 percent in Frankfurt at the market close, while the German blue-chip DAX closed up 0.42 percent. Separately, preferred shares in Porsche Automobil Holding SE sank almost 11.4 percent as more reports emerged that its finances had deteriorated further.

On Monday, the Financial Times reported that Volkswagen was considering raising up to 4 billion euros ($5.7 billion) ahead of a takeover of Porsche to protect its credit ratings, but did not provide further details.

"Volkswagen is planning to buy Porsche's sports car business as fast as possible and, to finance this, they are thinking about strengthening their capital base," the FT quoted a person familiar with the situation as saying.

A spokesman for Volkswagen declined to comment.

At present, VW is authorized by shareholders to raise its capital by a maximum nominal value of 90 million euros until May 2011 through the issue of new ordinary shares, assuming management would gain the approval of its supervisory board.
This would allow for the issue of 35 million new ordinary shares, which would raise its capital base by nearly 12 percent.
Yet bankers involved in the deal cast doubt on a capital increase involving the sale of ordinary shares, since it would almost certainly meet with opposition from Lower Saxony, VW's second-largest shareholder, which has two seats on the board.
Even when Volkswagen had to finance a costly restructuring programme at its ailing German operations that led to thousands of job cuts in 2006, it chose to raise 1.3 billion euros in fresh cash via the sale of its Europcar car-rental business that year rather than tap equity markets.
As an alternative, the company could issue new preferred shares that do not carry voting rights. "If there's a capital increase, then only with preferreds -- never with ordinaries," a banker familiar with the situation told Reuters.
If Volkswagen wanted to issue fresh non-voting shares, it would have to receive approval at a new shareholder meeting since management had sought unsuccessfully to gain the necessary approval from shareholders in April for authorized capital worth a nominal value of up to 400 million euros by 2014.
German business daily Handelsblatt, citing company sources, reported late on Monday that VW shareholders would be asked to vote on issuing new preferred shares at an extraordinary general meeting likely to be held in October.
Ratings risks
Another banker involved in the deal said the issue of a capital hike depends on whether VW would otherwise be "prepared to temporarily let its rating slip to BBB+ from A-."
VW preferred shares, which are more liquid than the closely held ordinary shares, were down just over 2 percent.
"A capital increase would make perfect sense for VW and would enable it to maintain its low-A ratings on S&P and Moody's despite the planned full takeover of Porsche AG over a period of two years," UniCredit debt analyst Sven Kreitmair wrote on Monday, upgrading VW bonds to "overweight" from "marketweight".
Volkswagen said last week it plans a gradual takeover of Porsche, and Lower Saxony Premier Christian Wulff said at the time that VW's supervisory board could approve a detailed plan on Aug. 13 with the aim of completing the deal in mid-2011.
Volkswagen's automotive operations had net cash of 10.7 billion euros at the end of March, so the group could afford to pay the reported sum of 8 billion for the Porsche acquisition.
VW had said in early May that maintaining its existing credit ratings has top priority when considering any deal to create an integrated automotive group.
German weekly magazine Der Spiegel reported recently that Porsche's debt totals about 14 billion euros. VW would need to pay Porsche roughly 7 billion for both the Porsche Holding auto dealership and a 49.9 percent stake in the Porsche AG sports car business, the magazine said.
In order to bolster its negotiating position versus VW, Porsche said on Thursday it would seek at least 5 billion euros in fresh funds either through cash or a contribution in kind, or a mixture of both.
M.M. Warburg downgraded Porsche to hold with a price target of 52 euros. Analyst Marc-Rene Tonn argued that the pressure on its share price stemmed partly from renewed concerns it could be saddled with 14 billion euros in debt, adding that there was still no clarity over how much liquidity Porsche might receive from Volkswagen and Qatar.

Qatar paid Porsche Automobil Holding SE hardly more than half the current market price for shares in Volkswagen AG in a multi-billion euro deal announced last week, several people familiar with the matter said on Wednesday.

The Gulf state is paying about 80 euros per VW ordinary share, the sources said.

Porsche, VW and Qatar declined to comment.

The stock fell 14 percent to close at a two-year low of 145.99 euros.

"Volkswagen ordinary shares are going to fall further, that is practically a done deal," a Frankfurt-based trader said.

VW shares had briefly topped 1,000 euros apiece last year -- making Volkswagen the world's most valuable company -- in a vicious "short squeeze" triggered when Porsche revealed it controlled about three-quarters of VW's voting stock.

Porsche said last week that it was selling assets worth billions of euros to Qatar in a move to prop up its strained finances, marking a climb-down for a predator that had once sought to dominate Volkswagen.