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Business

Volkswagen to take over Porsche, has eye on Toyota

Video by Damien McGUINNESS

Text by NEWS WIRES

Latest update : 2009-07-23

Volkswagen vowed on Thursday to take over fellow German auto maker Porsche, whose chairman Wendelin Wiederking resigned earlier in the day. VW also plans to overtake Toyota by 2018.

AFP - 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 percent 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 fueled 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 southwestern German city.
  
The concept approved by both companies includes the integration of Porsche's auto activities into VW and a reinforcement of the overall Porsche holding group's finances to guarantee its independence within the European auto giant.
  
Winterkorn's comments came after the owners of Porsche said they would also wrap up talks with Qatar and raise at least five billion euros (seven billion dollars) in fresh funds via a capital increase.
  
Further details of the new arrangement would be released on August 13 following another meeting of the VW supervisory board, the group said.
  
Porsche's owners, the Porsche and Piech families who are descendants of the company founder Ferdinand Porsche, said early Thursday following all-night talks that Wiedeking would resign and that "the basis for the creation of an integrated group between Porsche SE and Volkswagen AG" had been laid.
  
Wiedeking -- said to be the best-paid boss in Germany -- was to get 50 million euros in severance pay, of which half would go to a "social foundation" to aid Porsche workers and others.
  
Wiedeking and Porsche finance director Holger Haerter, who also resigned, had devised a bold financial strategy to take over VW based on complex stock options in the much bigger group.
  
Porsche SE, the holding company, currently owns 51 percent of the shares in VW.
  
The plan collapsed however, leaving Porsche with 10 billion euros in debt, and putting Piech in a position to turn the tables and take Porsche on as VW's 10th brand.
  
Porsche production chief Michael Macht, 48, is to succeed Wiedeking as head of Porsche's core automaking division, the company said.
  
But the prospect of VW swallowing up Porsche might provoke bitter resistance.
  
At a rally of 5,000 Porsche workers in Stuttgart, major shareholder Wolfgang Porsche insisted the maker of 911 sports cars would remain independent.
  
"Trust me ... the Porsche myth is alive and will never founder," he told the boisterous crowd with a trembling voice.
  
"The families are in complete agreement on the fact that Porsche's success is founded on the brand's independence," he said, and Porsche would now "negotiate with VW on equal terms."
  
Porsche abandoned Wiedeking's ambitious plan to take full control of VW and its hefty reserves of liquidity in May, and was forced to find other sources of financing.
  
The German state of Lower Saxony, which owns 20 percent of VW and holds a veto over its strategic decisions, stood between Porsche and VW's cash.
  
Lower Saxony regional premier Christian Wulff said Thursday that Porsche would remain an autonomous group along the lines of VW's high-end unit Audi.
  
"We will work together to become the world number one" automobile maker, Wulff added.
  

Date created : 2009-07-23

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