Porsche, the only financial engineer left standing

The only business still making a killing on the stockmarket isn't a bank - it's a sportscar maker.

by
Last Updated: 06 Nov 2012

The specialist German manufacturer Porsche – whose famous 911 model has been the successful Cityboy’s chariot of choice for decades – quadrupled its profits for the six months to January to 7.3Bn Euros. This despite a 13% slump in revenue and a  27% fall in sales. How? By playing the stockmarket.

It may be the kind of behaviour that we were more used to seeing from banks and hedge funds before the recession hit, but there is no doubt that Porsche’s secret accumulation of a 75% stake in Germany’s biggest car firm, Volkswagen Audi, last year turned out to be a very shrewd move. Much more so than all those subprime mortgages and CDOs, that’s for sure.

When it emerged in last autumn that Porsche had secretly – and controversially – accumulated a controlling stake in VW, the larger firm’s share price soared. Not only did Porsche enjoy a 6.8Bn Euro windfall as a result, it also caused a great deal of pain to a good number of hedge fund operators. The hedgies - who had been vigorously shorting VW in the expecation that it would follow the rest of the car industry down the pan – were caught with their trousers well and truly down.  Few tears were shed over their loss in Stuttgart, even though many were probably Porsche customers. That’s real schadenfreude for you.

And just in the nick of time, to boot. Todays’ results reveal that without its little flutter on the stockmarket, Posche would only have made around a paltry 400m Euros in first half profits. That’s the sum which its core car manufacturing business generated –a far from shabby performance given the parlous state of much of the rest of the motor industry at present, but a lot less than 7.3Bn Euros however you slice it.

All in all it’s a pretty good effort for a small manufacturer of upmarket cars in the teeth of the worst recession in decades. Some critics have suggested that what the firm did by not declaring its stake was tantamount to old-fashioned market manipulation, but that’s all water under the bridge. Others say that Porsche has now effectively become a hedge fund itself, and that making cars is increasingly irrelevant to the health of the business. Either way, it just goes to show that it is still possible to make a fortune on the stockmarket – so long as you leave the financial engineering to, well, real engineers.

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