Porsche beetles into VW

MT WEB EXCLUSIVE: In a remarkable piece of political and financial brinkmanship, hugely profitable but tiny German sportscar maker Porsche appears today to have cleared itself a path to launching an audacious reverse takeover of its giant compatriot, Volkswagen (VW).

by Andrew Saunders
Last Updated: 06 Nov 2012

If the deal goes ahead, it will be a truly massive meal for Porsche to swallow - its sales may be at record levels, but it still only shifts around 100,000 cars a year, whereas the VW Group - comprising the Volkswagen, Audi, Skoda and Seat brands - is Europe's biggest manufacturer, moving something like 5 million motors annually. But behind the statistics it's more evenly matched - in an industry beset by vanishing margins, Porsche's cut on each car sold is second to none. And all the news coming out of VW HQ at Wolfsburg recently has been of sex scandals, Brazilian prostitutes and troubles in the US market.

The mastermind behind the move - Ferdinand Piëch - is a man whose management methods deserve closer attention than they have received in the British press to date. For a start, he is a remarkable multi-tasker, occupying as he does both the chair of the bid prospect - VW - and the position of controlling shareholder of the potential bidder, Porsche. Sticklers for the Cadbury Code wouldn't like it, but it must make the logistics so much simpler.

Piëch is also a determined tactical and political operator, refusing to be put off by what looked to most people like insuperable odds. VW's ownership might have been constructed to put off potential suitors - the second biggest shareholder is the state of Lower Saxony, whose premier Christian Wulff sits on the board and has been a vocal opponent of Piëch's ambitions. VW is also protected by its own piece of national legislation (no doubt there are BAA execs now wishing they had been afforded a similar privilege) which bans any shareholder from exercising more than 20% of the voting rights.

But the advocate-general of the European Court of Justice has just issued a preliminary ruling that the law is illegal, and Wulff and his allies (who include former VW CEO Bernd Pischetschrieder, forced out of his job by Piëch last year) appear mysteriously to have thrown in the towel. That's 2-0 to Porsche, a result which bodes pretty well for Piëch's chances in the event of a formal takeover attempt. It's also worth noting that such a deal would place almost the entire German car industry in the hands of three family superpowers - the Porsches and Piëchs, plus the Quandts, who own most of BMW. Another nail in the coffin of the listed company?

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