Tectonic Shifts Around the World in the Car Biz

April 24th, 2009

The twisted Porsche/VW sale

Porsche CEO Wiedeking. Why is his thumb pointed down?

Porsche CEO Wiedeking: note thumb pointing down

A complicated story today got more complicated. It was reported widely yesterday that Porsche Automobil’s main shareholders (the Porsche and Piech families) were going to sell the sports-car business (Porsche AG) to its Volkswagen unit in order to reduce the holding company’s debt.

Today they denied it. Seems the cost of debt is rising along with the bad economy, and the company must look for other assets, which it has, if it wishes to follow through on its announced intent to buy around 75 percent of VW’s stock (it now owns 51 percent). All this sounds crazy but makes some kind of sense, as our friends at autoblog thankfully explained:

Wait, what? Didn’t Porsche just buy Volkswagen? Well yeah, for the most part. The parent company Porsche Automobil Holding SE holds majority interest in the Volkswagen group, and is planning on buying more. But in order to do so, the rumors suggest, the holding company would have to sell its auto manufacturing unit (Porsche AG) to Volkswagen, and then, we’re supposed to understand, turn around [and] buy another quarter of VW’s shares with the cash generated. (With us so far?) The put would undoubtedly drive Volkswagen’s shares up, generating more cash for VW and more debt for a hungry Porsche.

If these Porsche guys are so smart, how come they let the story leak before they had to deny it?

Fiat and Chrysler and Opel are dancing

sergio-marchionne1Another story leaking the rounds this week is Fiat’s possible interest in GM’s Opel. Boss Sergio Marchionne (left) reiterated he would not invest cash in Chrysler and that they were still trying to work a deal.

Yesterday, however, Reuters said Fiat and Opel were in talks: “GM needs to sell a big stake in Opel to get 3.3 billion euros (2.2 billion pounds) in loan guarantees from Germany and other European governments to rescue the troubled unit.” The question is whether Fiat could afford Opel after its recent larger-than-expected first-quarter loss. The company does have cash reserves of $6.6 billion, up $1.5 billion from last year.

It would seem Fiat is in a strong position even if the deal with Chrysler goes down.

Cheers! Ford loses only $1.4 billion last quarter; GM gets another $2B from the Feds

Happy (for now) Ford CEO Mullaly

Happy (for now) Ford CEO Mulally

All the analysts are waving flags that Ford lost less than they predicted it would, and in this kind of upside-down economy, I suppose that’s good news. “Still,” as CNN pointed out, “the latest losses come on top of $30 billion in net losses the company reported from 2006 through 2008.” And the losses will continue “through at least next year.”

This recent news does reinforce Ford’s position as the healthiest of the Big Three, which is to say they only have pneumonia, not lung cancer. The government’s Intensive Care Unit is still operating at full capacity, however. Treasury announced today it had lent $2 billion more in funds to help GM restructure before its June 1 deadline. Chrysler could get up to $6 billion more if it works out the deal with Fiat… by Thursday. What a timeline!

These fiscal moves may not be tectonic shifts, per our headline, but they are surely seismic rumblings of what’s to come.

Which of these stories seems most important in your view? Tell us why, please.

—jgoods

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