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Old 06-20-2009, 02:35 AM   #1
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Default Tables Turn in Porsche’s Pursuit of VW

FRANKFURT — When Wolfgang Porsche learned that his family’s sports car company would need an emergency cash infusion from its giant rival Volkswagen, he “went absolutely white.”It was as though he’d heard someone died,” said one person briefed on the secret meeting between executives of the two companies.The meeting, at the offices of the governor of Lower Saxony state, where Volkswagen is based, effectively ended the company’s audacious bid for Europe’s largest automaker. It also was the beginning of the end of Porsche’s cherished independence.

A day after the meeting, on March 23, fax machines around Germany spit out papers for Volkswagen’s board members to sign: an emergency loan of 700 million euros from Volkswagen, about $950 million at the time.

“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.”

Even amid the tumult that is the car industry these days, the story of Porsche and its overreaching ruling family is a singular drama. Its denouement was most likely prompted by Porsche’s taking out billions of euros in loans to acquire the last portion of Volkswagen that it did not own, enlarging its debt load at precisely the moment capital markets froze up.

At heart, though, the role reversal — where Porsche turned from Volkswagen’s predator to its prey — is the latest scene in a family saga.

“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.”

Both families descended from Ferdinand Porsche, who created the Volkswagen Beetle in the 1930s.
After World War II, Ferdinand’s son Ferry set up his own company, which became Porsche.

Meanwhile, Ferdinand’s daughter Louise married Anton Piëch, a Viennese lawyer; their son, Ferdinand Piëch, is now chairman of Volkswagen and has a seat on Porsche’s board.
In the early 1980s, the Porsche and Piëch clans beat back an effort by an errant cousin, Ernst Piëch, to sell his shares to a Kuwaiti investor. Instead, the Porsches bought him out, which allowed Wolfgang Porsche’s eventual 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, and said that it was 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 of VW, so that the tiny carmaker could share the costs of developing new technologies with the much larger VW.

That reflected a conviction, recently articulated by Sergio Marchionne, the chief executive of Fiat, that only automakers that command economies of scale will survive in the global economy.

In October, Porsche began an epic “short-squeeze” by announcing it had acquired 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.

But, in retrospect, Porsche appears to have scored a pyrrhic victory.

Getting the last 8 to 10 percent of Volkswagen may have been what broke Porsche, according to a person familiar with its finances, who requested anonymity because it involved confidential data. Porsche appears to have paid about 6 billion euros for that batch of stock, enlarging its debt load at precisely the moment that capital markets turned reluctant to lend money.

Now Wolfgang Porsche is having to accept Porsche’s integration into Volkswagen, rather than the hoped-for David-versus-Goliath takeover. And Porsche is seeking a loan from the German government and a cash infusion — from Arab investors.

The company has started exclusive talks with the Qatar Investment Authority, the country’s sovereign wealth fund. The fund could acquire up to 25 percent of Porsche’s voting shares, which have long kept the Porsche family 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 up to 5 billion euros ($6.9 billion) to the company, analysts estimate, helping to relieve the 9 billion euro debt load that Porsche incurred to acquire 50.76 percent of Volkswagen.

To tide it over, Porsche has applied for a 1.75 billion euro loan from a fund the German government set up in March to help companies weather the financial crisis. The request is being reviewed in Berlin, with a response expected in days or weeks.

But even a Qatari investment or a loan from the government will not revive Porsche’s VW project, analysts said. “That scenario does not exist anymore,” said Daniel Schwarz, an automotive analyst at Commerzbank in Frankfurt.

On May 6, Porsche and Volkswagen set a four-week deadline to create an “integrated” auto concern, but the deadline came and went amid some very public sniping from Mr.
Piëch.

The conflict centers on whether a fusion would simply make Porsche the 10th brand within the sprawling VW empire, or whether it would be a merger of equals.
An alpha male who is known to create fear among his underlings, Mr. Piëch has made clear that the goal was to reel in Porsche on VW’s terms.

In mid-May at the unveiling of a new version of VW’s Polo, a small hatchback, Mr. Piëch publicly criticized Mr. Wiedeking and Holger Härter, the chief financial officer who masterminded cornering VW stock. The men were partly responsible for Porsche’s precarious financial position, Mr. Piëch said, and VW’s cash would come with strings attached.
The statement stunned Porsche shareholders. Analysts say it is likely Volkswagen will now push harder 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 Investment, one of Germany’s largest fund managers. “But Mr. Piëch apparently wishes to put Porsche on the ropes.”

http://www.nytimes.com/2009/06/20/bu...er=rss&emc=rss
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Old 06-20-2009, 03:04 AM   #2
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now THIS is some interesting news....

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Old 06-28-2009, 08:21 AM   #3
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Default Volkswagen’s Piech Blackmails Porsche’s Wiedeking: Deal by Monday or Die



Quote:
A week ago, we predicted that Volkswagen, buoyed by stellar numbers, would soon swat nuisance Wiedeking once and for all. It didn’t take long. Ferdinand Piech, chairman of the supervisory board of Volkswagen and co-owner of Porsche, pulled out a big gun and put it to the head of Wendelin Wiedeking, CEO of Porsche (and theoretically Piech’s employee). Piech said (we are paraphrasing in the interest of brevity): “Say uncle by Monday. Or you’re dead.”
Nice family.

According to Der Spiegel, VW and the state of Lower Saxony set Wiedeking a deadline. If he doesn’t accept the offer by Monday, Porsche’s already dire financial situation will become untenable.

The joint ultimatum goes like this: VW buys 49 percent of the Porsche AG for anywhere between €3 and €4 billion. The money goes to the Porsche Holding, of which Piech owns a good chunk. As a next step, the Emir of Qatar will buy the options for 25 percent of VW stock, which are held by the Porsche Holding. Then, VW and Porsche will merge. When everything is said and done, the Porsche/Piech families will end up owning more than 40 percent of VW-Porsche, Lower Saxony will keep its 20 percent, Quatar will have 15 percent, another unnamed sovereign wealth fund (any guesses?) will hold five percent. Less than 20 percent will be publicly traded, which should keep the stock scarce and high. This plan is the joint work product of VW CEO Martin Winterkorn, VW CFO Hans Dieter Pötsch, Lower Saxony’s Premier Christian Wulff and of course Ferdinand Piech. Der Spiegel didn’t name sources for the story. The details of the transaction are fine grained. There must be a big leak in the executive washroom on the top floor of the Volkswagen Hochhaus.

What if Wiedeking says no? Will he find the head of a horse in his bed? This is Germany, and the dealings are more subtle: If he says no, VW will recall its €700 million loan they had given Porsche last March to save them from bankrutptcy.

Should it come to that, the Emir of Qatar will walk. He made clear that he’s only interested in a Porsche-VW company where the owners share a common goal and are off each others’ throats. With the Emir gone and the loan recalled, Porsche AG (the car company) is DOA. If Wiedeking gives in, his job is DOA.

The story jibes with the information collected by the Süddeutsche Zeitung. Bankers told the SZ that Qatar has its eyes on big Volkswagen. They were only talking to little Porsche to get their hands on the VW options. To sweeten the deal, Qatar could deliver a chopped head to Wolfsburg: Wiedeking’s. Qatar doesn’t want to “fight with Wiedeking against the rest of the world.” To win over Piech and Lower Saxony, Wiedeking has to go. Judging from the ultimatum, Piech, Lower Saxony, and Quatar are already in agreement.
There is no other white knight that may ride to Porsche’s rescue. Daimler was rumored to be interested.

Today, Daimler’s Zetsche gave Die Welt an interview and Porsche the cold shoulder: “If we would be interested in Porsche, we would tell them.” And: “Porsche is closely integrated with Volkswagen’s activities. It doesn’t make sense contemplating to replace this integration with another one.” Zetsche also intimated that Porsche had leaked the possible link-up with Daimler: “I can understand that spinning the same story again and again can get boring. One likes to drop other names.” In other words: Porsche, get lost. Daimler has its own problems.

So what’s left for Porsche? All they can do is fume.
“Porsche’s chairman is furious with Volkswagen AG. Wolfgang Porsche said in a statement Saturday that the sports car maker would not be “blackmailed” into a merger with VW,” Automotive News [sub] writes.
More than miffed, Wolfgang Porsche flames in the direction of Wolfsburg:
We are deeply concerned and irritated by the wording of the ultimatum. The 21st century is not the time for ultimatums. We wonder what the whole matter is really about and whether the focus is still on our common cause at all.
We will not give in to such pressure or blackmail. Such action does not help anybody. It is detrimental to the entire cause. This is not the way to support and uphold common interests.
We sincerely hope that the perpetrators of the ultimatum, in consideration of our common interests, calm down again and follow up their proposals in internal discussions and not through headlines. We are open to such talks at any time.
The missileve was co-signed by Uwe Hück, Wolfgang Porsche’s deputy on the board and representative of the worker’s council. Workers and managers, unite! They must have been close to tears when they wrote this. All smugness is gone. The strongly worded protest confirms that Der Spiegel has its details right.

On Friday, Porsche had bragged it was close to reaching a deal with Qatar. At the same time, Qatar, Piech, and Lower Saxony got a little cozier. Now, all that’s left to Porsche is to whine and to invoke noble principles. It won’t work
http://www.thetruthaboutcars.com/vol...monday-or-die/
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Old 06-28-2009, 12:46 PM   #4
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It's sad that a middle eastern oligarch is the one who is trying to talk sense into the Germans. The infighting in Bavaria is sad.
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Old 06-28-2009, 10:17 PM   #5
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The infighting in the Porsche family is sad.
TFTFY.

The relationship between Porsche and VW at a personal level has always been a little unhealthy.
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Old 06-29-2009, 01:56 AM   #6
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wow, this is entertaining! German auto drama is way cooler than ours.

I can only imagine what kinds of words Wolfgang Porsche has for his CFO.
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Old 06-29-2009, 02:17 AM   #7
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Default VW denies giving Porsche takeover ultimatum

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MUNICH -- Volkswagen AG denied today that it had presented Porsche Automobil Holding SE with an ultimatum to accept its plan for a merger of the two carmakers.
On Saturday, Porsche accused VW and the German state of Lower Saxony of extortion following a report that VW has demanded that Porsche accept a tie-up of the two carmakers with VW in charge. Lower Saxony is VW's second largest shareholder after Porsche.

"There is no ultimatum," a VW spokesman said on Sunday. He would not comment further.

Germany's Der Spiegel magazine reported on Saturday that VW had given Porsche a Monday deadline to agree that VW take a 49 percent stake in Porsche's sports car business.
The magazine said VW would ask Porsche to pay back a 700 million euro ($983.8 million) loan in September unless Porsche agreed to VW's demand.

Porsche Chairman Wolfgang Porsche and his supervisory board deputy, Uwe Hueck, said in a statement on Saturday they had been given an ultimatum by VW and Lower Saxony and that they would "not accept extortion.”

Qatar, too
Der Spiegel said Porsche CEO Wendelin Wiedeking and Wolfgang Porsche have been pressed to agree that VW takes a 49 percent stake in Porsche's sports car business for 3 billion to 4 billion euros ($4.2 billion to $5.6 billion).
According to the proposal, the Emirate of Qatar would buy Porsche's stock options in VW, which would subsequently integrate the Porsche sports car business into its operations.
Porsche owns 51 percent of Volkswagen and has stock options for a further 25 percent. The company amassed 9 billion euros ($12.7 billion) debt trying to swallow VW before the financial crisis threw it off course.

Der Spiegel reported that under the proposal the merged carmaker would eventually be 40 percent owned by the Porsche and Piech families, 20 percent by Lower Saxony, 15 percent by Qatar, and another sovereign wealth fund would hold 5 percent.

In the statement, Wolfgang Porsche also said: “We are deeply concerned and irritated by the wording of the ultimatum. … The 21st century is not the time for ultimatums. We wonder what the whole matter is really about and whether the focus is still on our common cause at all.”

On Friday, Porsche said it was close to reaching a deal with Qatar that could help solve its financial problems.
"The negotiations have entered the final stretch," a spokesman for Porsche said, adding Qatar had finished examining its books. "The due diligence has reached a positive conclusion.

http://www.autonews.com/article/2009...xzz0JnUO85MS&D
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Old 06-29-2009, 04:26 AM   #8
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Good stuff. Infighting will always result in giving outsiders an entry point to get in ----one of the oldest stories known to man, from empires to relationships. It usually ends with someone totally unrelated owning it all.
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Old 06-29-2009, 12:35 PM   #9
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This is almost a soap opera
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Old 06-29-2009, 01:29 PM   #10
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oh what a tangled web those wacky Germans weave
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Old 06-29-2009, 06:58 PM   #11
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Originally Posted by Lboogie View Post
oh what a tangled web those wacky Germans weave
tru but what a machine they weave too - they love what they do and are fierce to protect it.
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