VW may delay Porsche merger amid lawsuits

Volkswagen AG may need to put on hold a combination with Porsche SE planned for next year to resolve pending US lawsuits and German tax disputes, VW Chief Executive Officer Martin Winterkorn said.

“The legal proceedings may drag on for some time to come until a final decision is reached. For that reason, the planned merger could possibly be delayed,” Winterkorn, also CEO of Porsche’s holding company, said in a speech today. “We’re still facing a tax-related hurdle and several legal obstacles.”

Volkswagen agreed to join with Porsche in August 2009 after the 911 sports-car maker’s debt tripled to more than ¤10 billion ($14 billion) following a failed bid to buy Europe’s largest car maker by securing stock through options trading. VW has since purchased 49.9 per cent of Porsche’s operating unit for ¤3.9 billion, setting the stage for a merger in 2011.

Porsche is being sued by US-based short sellers of VW stock who claim the sports-car maker secretly cornered the market in VW shares and later caused them more than $1 billion in losses. VW’s merger with Porsche is also being hampered by negotiations with German tax authorities over the tax-exempt status of profits from Porsche’s options transactions.

“Porsche SE currently assumes that a successful resolution of the risk factors is possible and that the merger will therefore materialise,” said VW Chief Financial Officer Hans- Dieter Poetsch, who’s also on Porsche’s board.

Shares drop
Porsche’s preferred shares dropped as much as ¤1.90, or 4.5 per cent, to ¤40.80 and were down 4 per cent as of 1:26 pm in Frankfurt trading. The stock has declined 6.3 per cent this year, valuing the car maker at ¤7.18 billion.