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| Driving seat |
| Pierre Briancon / May 19, 2009, 00:57 IST |
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A 51 per cent stake doesn’t buy you much these days in Germany, as Porsche is finding out. The luxury car maker über-leveraged itself when it built up its majority ownership of Volkswagen, its much larger German rival. The two companies – each run by one of the feuding branches of the family that controls Porsche – earlier this month decided they should merge. But Volkswagen has the upper hand in the negotiations. To drive the point home, it just decided to walk out of the talks.
Ferdinand Piëch, the Volkswagen chairman who broke ranks with his cousins on the matter, wants Porsche to come clean about the real state of its finance – notably the cost of the options to buy some 20 per cent more of VW that are still sitting on its books. Porsche, on the other hand, doesn’t want to become just another of the ten brands sitting under the VW umbrella. But its management is running into a powerful alliance: VW management, its unions and one of Germany’s state governments.
The state of Lower Saxony has a 20 per cent stake in VW that allows it to block any strategic decision. Ever since Porsche went on its buying spree, Piëch has used that poison pill deftly, while enrolling support from the powerful unions. These allies give him the authority to dictate his conditions for a merger: the location of headquarters (Wolfsburg, where VW is based), the boss (VW’s chief executive), and the value of Porsche (not too much).
All Piëch needs is a clearer view of Porsche’s financial situation. This will largely determine the mechanics of the merger. He would prefer a simple form – VW buys Porsche’s automobile division from Porsche SE, the listed holding company. The main obsession of Porsche’s management these days appears to be to avoid losing face. Unless the refusal to come clean on the options game means it has something to hide.
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