How Porsche’s VW Dream Became a Nightmare
06-19-2009, 02:38 PM
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How Porsche’s VW Dream Became a Nightmare
From the NY Times:
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How Porsche’s VW Dream Became a Nightmare
By CARTER DOUGHERTY
FRANKFURT — When Wolfgang Porsche learned that his family’s sports-car maker, once bent on taking over Volkswagen, now had to beg its giant rival for money, he looked as if he were going to faint.
“He went absolutely white,” said one person briefed on that secret meeting, which involved executives from both companies. “It was as though he’d heard someone died.”
A day later, on March 23, fax machines around Germany spit out a piece of paper for Volkswagen’s board members to sign: an emergency loan of €700 million, or $977 million, for Porsche from its former prey — Volkswagen.
The meeting at the office of the governor of Lower Saxony state, where Volkswagen is based, effectively ended Porsche’s audacious bid to become the largest automaker in Europe. And the consequences of the Porsche family’s overreaching go further as its car making business, while still profitable, faces the end of its cherished independence.
Mr. Porsche is now on the verge of accepting Porsche’s integration into Volkswagen, rather than the hoped-for David-versus-Goliath takeover. On top of that embarrassment, Porsche also is seeking outside investors and a government bailout.
“This is becoming a reverse takeover on a financial level,” said Arndt Ellinghorst, head of automotive research at Credit Suisse in London. “Porsche has debt and VW has the luxury of cash.”
Porsche said Friday that its nine-month sales dropped 15 percent, to €4.6 billion. The company reiterated that revenue and earnings would fall this year, based on “extremely poor business” in the first three months of 2009.
The sports car maker has entered exclusive talks with the Qatar Investment Authority, the sovereign wealth fund of the energy-rich Persian Gulf emirate. It could acquire as much as 25 percent of Porsche’s voting shares, which have long kept the Porsche family firmly in charge. The Qataris, who would get a seat on Porsche’s supervisory board, may also purchase the options Porsche has on VW shares.
Qatar could bring as much as €5 billion into the company, analysts estimate, helping to relieve the €9 billion debt load that Porsche incurred to acquire 50.76 percent of Volkswagen.
To tide it over, Porsche has applied for a loan of €1.75 billion from a fund the German government set up in March to help companies through the financial crisis. The request is being reviewed in Berlin, with a response expected in the coming days or weeks.
The surprising turnabout is the latest in a history of squabbles between the Porsche and Piëch clans — both descended from Ferdinand Porsche, who created the Volkswagen Beetle in the 1930s.
After World War II, Ferdinand Porsche’s son, Ferry, set up his own company, which became Porsche. Mr. Porsche’s daughter Louise married Anton Piëch, a Viennese lawyer; their son, Ferdinand, is now chairman of Volkswagen and sits on Porsche’s board.
“In the end, this is about clans,” said Stefan Bratzel, head of the automotive research center at the University of Applied Sciences and Economics in Bergisch-Gladbach, near Cologne. “It is the Porsche clan versus the Piëch clan, who belong to a single familial line, but maybe that makes the conflict that much harder.”
In the early 1980s, the Porsche and Piëch clans beat back an attempt by an errant cousin, Ernst Piëch, to sell his shares to a Kuwaiti investor. Instead, the Porsches bought him out, ensuring Wolfgang Porsche’s appointment as chairman years later.
Four years ago, Porsche acquired a 20 percent stake in Volkswagen. Porsche’s chief executive, Wendelin Wiedeking, called the move defensive, aimed at protecting one of his company’s most important partners from a hostile takeover.
But as time passed, it became clear that Porsche wanted full control so the tiny car maker could share the costs of developing new technologies with much-larger Volkswagen. That reflected a conviction, recently articulated by Sergio Marchionne, the chief executive of Fiat, that only automakers that command major economies of scale would survive in the global economy.
In October, Porsche set off an epic “short-squeeze” by announcing that it had shares and options equal to nearly 75 percent of Volkswagen’s stock. That forced hedge funds and traders who had sold the shares short — a process that involves lending them out — to buy them back at astronomical prices.
For a brief period, VW was the world’s most valuable company. The Porsche finance chief, Holger Härter, was a minor legend, the German who had beaten London and New York traders at their own game. But, in retrospect, Porsche appears to have scored a Pyrrhic victory.
Getting the last 8 percent to 10 percent of Volkswagen it bought may have been what broke Porsche, according to a person familiar with its finances, who requested anonymity because the subject involved confidential data. Porsche appears to have paid about €6 billion for that segment of stock, enlarging its debt just when capital markets turned reluctant to lend money anew.
The result is that even a Qatari investment, or a loan from the government, cannot revitalize the project for taking full control of VW, analysts said. “This does not create a chance for Porsche to resume the takeover of VW,” said Daniel Schwarz, an automotive analyst at Commerzbank in Frankfurt. “That scenario does not exist anymore.”
On May 6, Porsche and Volkswagen set a four-week deadline for creating an “integrated” auto concern, but the deadline came and went amid some very public sniping from Ferdinand Piëch. The conflict centers on whether a fusion would simply make Porsche the 10th brand within the sprawling VW empire, or whether it would have a merger-of-equals quality.
Mr. Piëch has long been something of a black sheep in the family as well. He left an engineering job at Porsche to pursue a career at Volkswagen. A legendary alpha male who is known to arouse fear among his underlings, Mr. Piëch has made it clear that the goal is to reel Porsche in on VW’s terms.
In mid-May at the unveiling of a new version of the VW Polo, a small hatchback, Mr. Piëch publicly badmouthed both Mr. Wiedeking and Mr. Härter. They were partly responsible for the sports-car maker’s precarious financial position, he said, and cash-rich VW would not bail them out with no strings attached.
The statement stunned Porsche shareholders, but Mr. Piëch has made it clear that his interests lie primarily with Volkswagen, which analysts say is likely to push harder now to seize control of Porsche.
“German law clearly says you cannot say things publicly that violate the overriding general interest of the company,” said Christian Strenger, a board member of DWS Investments, one of Germany’s largest fund managers. “But Mr. Piëch apparently wishes to put Porsche on the ropes.”
~~~~~~~~~~~~~~~~~~~~~~~~~~
How Porsche’s VW Dream Became a Nightmare
By CARTER DOUGHERTY
FRANKFURT — When Wolfgang Porsche learned that his family’s sports-car maker, once bent on taking over Volkswagen, now had to beg its giant rival for money, he looked as if he were going to faint.
“He went absolutely white,” said one person briefed on that secret meeting, which involved executives from both companies. “It was as though he’d heard someone died.”
A day later, on March 23, fax machines around Germany spit out a piece of paper for Volkswagen’s board members to sign: an emergency loan of €700 million, or $977 million, for Porsche from its former prey — Volkswagen.
The meeting at the office of the governor of Lower Saxony state, where Volkswagen is based, effectively ended Porsche’s audacious bid to become the largest automaker in Europe. And the consequences of the Porsche family’s overreaching go further as its car making business, while still profitable, faces the end of its cherished independence.
Mr. Porsche is now on the verge of accepting Porsche’s integration into Volkswagen, rather than the hoped-for David-versus-Goliath takeover. On top of that embarrassment, Porsche also is seeking outside investors and a government bailout.
“This is becoming a reverse takeover on a financial level,” said Arndt Ellinghorst, head of automotive research at Credit Suisse in London. “Porsche has debt and VW has the luxury of cash.”
Porsche said Friday that its nine-month sales dropped 15 percent, to €4.6 billion. The company reiterated that revenue and earnings would fall this year, based on “extremely poor business” in the first three months of 2009.
The sports car maker has entered exclusive talks with the Qatar Investment Authority, the sovereign wealth fund of the energy-rich Persian Gulf emirate. It could acquire as much as 25 percent of Porsche’s voting shares, which have long kept the Porsche family firmly in charge. The Qataris, who would get a seat on Porsche’s supervisory board, may also purchase the options Porsche has on VW shares.
Qatar could bring as much as €5 billion into the company, analysts estimate, helping to relieve the €9 billion debt load that Porsche incurred to acquire 50.76 percent of Volkswagen.
To tide it over, Porsche has applied for a loan of €1.75 billion from a fund the German government set up in March to help companies through the financial crisis. The request is being reviewed in Berlin, with a response expected in the coming days or weeks.
The surprising turnabout is the latest in a history of squabbles between the Porsche and Piëch clans — both descended from Ferdinand Porsche, who created the Volkswagen Beetle in the 1930s.
After World War II, Ferdinand Porsche’s son, Ferry, set up his own company, which became Porsche. Mr. Porsche’s daughter Louise married Anton Piëch, a Viennese lawyer; their son, Ferdinand, is now chairman of Volkswagen and sits on Porsche’s board.
“In the end, this is about clans,” said Stefan Bratzel, head of the automotive research center at the University of Applied Sciences and Economics in Bergisch-Gladbach, near Cologne. “It is the Porsche clan versus the Piëch clan, who belong to a single familial line, but maybe that makes the conflict that much harder.”
In the early 1980s, the Porsche and Piëch clans beat back an attempt by an errant cousin, Ernst Piëch, to sell his shares to a Kuwaiti investor. Instead, the Porsches bought him out, ensuring Wolfgang Porsche’s appointment as chairman years later.
Four years ago, Porsche acquired a 20 percent stake in Volkswagen. Porsche’s chief executive, Wendelin Wiedeking, called the move defensive, aimed at protecting one of his company’s most important partners from a hostile takeover.
But as time passed, it became clear that Porsche wanted full control so the tiny car maker could share the costs of developing new technologies with much-larger Volkswagen. That reflected a conviction, recently articulated by Sergio Marchionne, the chief executive of Fiat, that only automakers that command major economies of scale would survive in the global economy.
In October, Porsche set off an epic “short-squeeze” by announcing that it had shares and options equal to nearly 75 percent of Volkswagen’s stock. That forced hedge funds and traders who had sold the shares short — a process that involves lending them out — to buy them back at astronomical prices.
For a brief period, VW was the world’s most valuable company. The Porsche finance chief, Holger Härter, was a minor legend, the German who had beaten London and New York traders at their own game. But, in retrospect, Porsche appears to have scored a Pyrrhic victory.
Getting the last 8 percent to 10 percent of Volkswagen it bought may have been what broke Porsche, according to a person familiar with its finances, who requested anonymity because the subject involved confidential data. Porsche appears to have paid about €6 billion for that segment of stock, enlarging its debt just when capital markets turned reluctant to lend money anew.
The result is that even a Qatari investment, or a loan from the government, cannot revitalize the project for taking full control of VW, analysts said. “This does not create a chance for Porsche to resume the takeover of VW,” said Daniel Schwarz, an automotive analyst at Commerzbank in Frankfurt. “That scenario does not exist anymore.”
On May 6, Porsche and Volkswagen set a four-week deadline for creating an “integrated” auto concern, but the deadline came and went amid some very public sniping from Ferdinand Piëch. The conflict centers on whether a fusion would simply make Porsche the 10th brand within the sprawling VW empire, or whether it would have a merger-of-equals quality.
Mr. Piëch has long been something of a black sheep in the family as well. He left an engineering job at Porsche to pursue a career at Volkswagen. A legendary alpha male who is known to arouse fear among his underlings, Mr. Piëch has made it clear that the goal is to reel Porsche in on VW’s terms.
In mid-May at the unveiling of a new version of the VW Polo, a small hatchback, Mr. Piëch publicly badmouthed both Mr. Wiedeking and Mr. Härter. They were partly responsible for the sports-car maker’s precarious financial position, he said, and cash-rich VW would not bail them out with no strings attached.
The statement stunned Porsche shareholders, but Mr. Piëch has made it clear that his interests lie primarily with Volkswagen, which analysts say is likely to push harder now to seize control of Porsche.
“German law clearly says you cannot say things publicly that violate the overriding general interest of the company,” said Christian Strenger, a board member of DWS Investments, one of Germany’s largest fund managers. “But Mr. Piëch apparently wishes to put Porsche on the ropes.”
06-21-2009, 03:18 AM
#2
it is almost if the "heads" of Porsche studied financial economics in the USA...what a DUMBa..ses...didn't they see the recession coming at ALL?!???!?!
In the end a Porsche made by VW wouldn't be all that bad......still a great german product...just hopping they are not going to share interior parts....but then again Porsches interior part aren't the greatest either.
In the end a Porsche made by VW wouldn't be all that bad......still a great german product...just hopping they are not going to share interior parts....but then again Porsches interior part aren't the greatest either.
06-22-2009, 03:15 PM
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Things seem to be going downhill fast.... looks like we may all be driving VW's.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Porsche reportedly talked to Daimler as loan bid is rebuffed
Qatar may take bigger-than-expected stake in maker of the Boxster and Carrera
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- German authorities are set to deny a request by Porsche for a loan of 1.75 billion euros ($2.43 billion), while the sports-car maker has also talked to rival Daimler about a potential investment, according to published reports.
Porsche has built up about 9 billion euros of debt from its long-running attempt to gain control of Volkswagen .
It needs cash to reduce that burden, but the Financial Times reported Sunday that the German government had informally decided to deny the request after state-owned bank KfW advised against it.
Separately, Manager Magazin reported on its Web site late Friday that Porsche had held talks with Daimler at the end of last month.
The talks revolved around Daimler either buying a direct stake in the maker of the iconic 911 sports car or receiving options for shares in Volkswagen, the report said.
Shares of Porsche fell 1.1% Monday, while Daimler climbed 1.2% in Frankfurt. Volkswagen's shares fell 2.7%.
Porsche has previously said it's in exclusive talks about selling a stake of about 25% to Qatar.
Germany's Focus magazine reported that Qatar could end up acquiring a stake of as much as 29.9%, citing a paper presented by Porsche CEO Wendelin Wiedeking to the Porsche and Piech families.
Commerzbank analyst Daniel Schwarz said a deal with Qatar seems more likely than Daimler, in light of the pressure to find fresh equity and previous comments by Dieter Zetsche, the chief executive of Daimler AG.
"Rumors of interest by Daimler may even serve to accelerate a decision by Qatar," Schwarz said.
"However, despite DaimlerChrysler being a prominent example of failed M&A, we would not deny the industrial logic of such a step given rising technology costs," he added.
Analysts at Oppenheim Research said there would be little logic behind Daimler acquiring a 25% stake in Porsche, because what the sports-car maker really needs is the industrial integration with Volkswagen that began years ago.
"In our view, these press reports only underline the desperate situation of Porsche," said analysts Christian Breitsprecher and Jens Schattner in a note to clients.
"In the end we think that Porsche will have to do a massive rights issue and sell its sports-car business to VW," they added.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Porsche reportedly talked to Daimler as loan bid is rebuffed
Qatar may take bigger-than-expected stake in maker of the Boxster and Carrera
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- German authorities are set to deny a request by Porsche for a loan of 1.75 billion euros ($2.43 billion), while the sports-car maker has also talked to rival Daimler about a potential investment, according to published reports.
Porsche has built up about 9 billion euros of debt from its long-running attempt to gain control of Volkswagen .
It needs cash to reduce that burden, but the Financial Times reported Sunday that the German government had informally decided to deny the request after state-owned bank KfW advised against it.
Separately, Manager Magazin reported on its Web site late Friday that Porsche had held talks with Daimler at the end of last month.
The talks revolved around Daimler either buying a direct stake in the maker of the iconic 911 sports car or receiving options for shares in Volkswagen, the report said.
Shares of Porsche fell 1.1% Monday, while Daimler climbed 1.2% in Frankfurt. Volkswagen's shares fell 2.7%.
Porsche has previously said it's in exclusive talks about selling a stake of about 25% to Qatar.
Germany's Focus magazine reported that Qatar could end up acquiring a stake of as much as 29.9%, citing a paper presented by Porsche CEO Wendelin Wiedeking to the Porsche and Piech families.
Commerzbank analyst Daniel Schwarz said a deal with Qatar seems more likely than Daimler, in light of the pressure to find fresh equity and previous comments by Dieter Zetsche, the chief executive of Daimler AG.
"Rumors of interest by Daimler may even serve to accelerate a decision by Qatar," Schwarz said.
"However, despite DaimlerChrysler being a prominent example of failed M&A, we would not deny the industrial logic of such a step given rising technology costs," he added.
Analysts at Oppenheim Research said there would be little logic behind Daimler acquiring a 25% stake in Porsche, because what the sports-car maker really needs is the industrial integration with Volkswagen that began years ago.
"In our view, these press reports only underline the desperate situation of Porsche," said analysts Christian Breitsprecher and Jens Schattner in a note to clients.
"In the end we think that Porsche will have to do a massive rights issue and sell its sports-car business to VW," they added.
06-22-2009, 04:24 PM
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Yeah, that's the latest as of today -- that debt is really crushing the company right now.
Kind of amazing the government bank didn't step up. It really is pretty dire.
Something's going to happen pretty soon, either Qatar or VW, I doubt MB.
Kind of amazing the government bank didn't step up. It really is pretty dire.
Something's going to happen pretty soon, either Qatar or VW, I doubt MB.
06-28-2009, 12:00 AM
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The saga continues! (but "blackmail"??)
~~~~~~~~~~~~~~~~~~~~
Porsche rejects latest merger offer by Volkswagen: report
Volkswagen proposal involves Emirate of Qatar and the state of Lower Saxony
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) -- Porsche Automobil Holding SE said Saturday it is rejecting an ultimatum by Volkswagen and a large shareholder to accept a merger of the two automotive companies that would have put VW in charge, Dow Jones Newswires reported Saturday.
The new proposal sought to have Porsche CEO Wendelin Wiedeking and Chairman Wolfgang Porsche agree by the end of June to a deal that would have had the Emirate of Qatar buying Porsche's stock options in VW, with VW taking a 49 percent stake in Porsche's sports-car business for 3 billion euros to 4 billion euros ($4.2 billion to $5.6 billion), reports said.
If the deal were to go ahead, the Porsche family, together with Porsche co-owner Ferdinand Piech, would eventually own 40 percent of the car manufacturer. The state of Lower Saxony would own an additional 20 percent, Qatar would control 15 percent and another currently unnamed sovereign-wealth fund would own an additional 5 percent.
However, if Porsche doesn't accept Volkswagen's proposal, Volkswagen could press Porsche to pay back a 700 million euro loan by September. Volkswagen granted the loan to Porsche in March.
According to reports, Wolfgang Porsche said in a statement that the company doesn't accept blackmail offers, referring to the possibility that Volkswagen could insist on a redemption of the loan.
Porsche owns a 51 percent stake in Volkswagen. It has abandoned plans to hike that stake to 75 percent.
~~~~~~~~~~~~~~~~~~~~
Porsche rejects latest merger offer by Volkswagen: report
Volkswagen proposal involves Emirate of Qatar and the state of Lower Saxony
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) -- Porsche Automobil Holding SE said Saturday it is rejecting an ultimatum by Volkswagen and a large shareholder to accept a merger of the two automotive companies that would have put VW in charge, Dow Jones Newswires reported Saturday.
The new proposal sought to have Porsche CEO Wendelin Wiedeking and Chairman Wolfgang Porsche agree by the end of June to a deal that would have had the Emirate of Qatar buying Porsche's stock options in VW, with VW taking a 49 percent stake in Porsche's sports-car business for 3 billion euros to 4 billion euros ($4.2 billion to $5.6 billion), reports said.
If the deal were to go ahead, the Porsche family, together with Porsche co-owner Ferdinand Piech, would eventually own 40 percent of the car manufacturer. The state of Lower Saxony would own an additional 20 percent, Qatar would control 15 percent and another currently unnamed sovereign-wealth fund would own an additional 5 percent.
However, if Porsche doesn't accept Volkswagen's proposal, Volkswagen could press Porsche to pay back a 700 million euro loan by September. Volkswagen granted the loan to Porsche in March.
According to reports, Wolfgang Porsche said in a statement that the company doesn't accept blackmail offers, referring to the possibility that Volkswagen could insist on a redemption of the loan.
Porsche owns a 51 percent stake in Volkswagen. It has abandoned plans to hike that stake to 75 percent.
07-06-2009, 10:04 AM
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Three parties interested in Porsche stake: report
NEW YORK (MarketWatch) -- Three new parties with an interest in taking a stake in German car maker Porsche Automobil Holding have emerged, according to reports Saturday. Reuters quoted German magazine Focus, which reported that a Chinese and a Russian sovereign wealth fund as well as a hedge fund were interested, rivaling investment plans by Qatar. Reuters said a Porsche spokesman declined to comment on the report.
NEW YORK (MarketWatch) -- Three new parties with an interest in taking a stake in German car maker Porsche Automobil Holding have emerged, according to reports Saturday. Reuters quoted German magazine Focus, which reported that a Chinese and a Russian sovereign wealth fund as well as a hedge fund were interested, rivaling investment plans by Qatar. Reuters said a Porsche spokesman declined to comment on the report.
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07-06-2009, 10:54 AM
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07-17-2009, 11:31 PM
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Porsche CEO may lose control in VW deal: WSJ
And in today's news.....
SAN FRANCISCO (MarketWatch) -- Porsche Automobil Holding SE Chief Executive Wendelin Wiedeking is expected to relinquish "operational control" of the German car maker in a reversal of its attempt to take over Volkswagen AG, according to a report published late Friday.
The online edition of The Wall Street Journal, citing unnamed sources, reported that Weideking's stepping aside would open the way for VW to assert more control over Porsche's car-making arm, "and could end a more than three-year battle between the two German auto companies that are linked by family stakeholders."
According to a compromise under consideration, Weideking would retain his CEO title at Porsche's holding company, the report said, while noting that Porsche has repeatedly denied that Wiedeking is on his way out.
Porsche and VW are nearing a deal that would hand VW a 49% stake in Porsche's core auto business, according to the report.
Porsche has been raising its own shareholding in VW since 2005, reaching nearly 51% with a set of options to buy a further 20% stake, according to the report. However, Porsche's net debt has reached "unsustainable" levels more recently thanks to the global economic downturn.
SAN FRANCISCO (MarketWatch) -- Porsche Automobil Holding SE Chief Executive Wendelin Wiedeking is expected to relinquish "operational control" of the German car maker in a reversal of its attempt to take over Volkswagen AG, according to a report published late Friday.
The online edition of The Wall Street Journal, citing unnamed sources, reported that Weideking's stepping aside would open the way for VW to assert more control over Porsche's car-making arm, "and could end a more than three-year battle between the two German auto companies that are linked by family stakeholders."
According to a compromise under consideration, Weideking would retain his CEO title at Porsche's holding company, the report said, while noting that Porsche has repeatedly denied that Wiedeking is on his way out.
Porsche and VW are nearing a deal that would hand VW a 49% stake in Porsche's core auto business, according to the report.
Porsche has been raising its own shareholding in VW since 2005, reaching nearly 51% with a set of options to buy a further 20% stake, according to the report. However, Porsche's net debt has reached "unsustainable" levels more recently thanks to the global economic downturn.
