More Sturm und Drang at Porsche

Car Eater

Volkswagen Lunch

Over the weekend, the respected media outlet der Spiegel reported that the end of the drama was near: Volkswagen was finally going to buy out Porsche. The latter company, if you remember, chewed off more than it could swallow when it bought some 51 percent of VW stock in an attempt to consume its larger brother, and has since suffered grievous indigestion owing to the €9-billion debt incurred.

We told this story back in May, and the family squabbles may finally be resolved. Now it may be VW’s turn to eat.

VW has planned a two-step purchase of Porsche for €8 billion ($11.3 billion). Now, says Sueddeutsche Zeitung, there will be substantial tax consequences to the tune of $4.3 billion that may scuttle the deal. No comment from the principals.

Another problem seems to be Porsche CEO Wiedeking, who earns a lot of money and will want lots more before he leaves the helm. He reportedly loves his job and earned about $109 million last year as he took a 0.9-percent share of the company’s pretax profit. Wiedeking is one tough customer who has alienated the unions but

transformed the 911 sports-car manufacturer, almost bankrupt when he became CEO in 1993, into the automaker with the highest profit margins for the industry. In 2005, he began using cash from the luxury-vehicle business to acquire shares of Volkswagen, a company that builds more cars in a week than Porsche does in a year.

The strategy worked until Wiedeking’s efforts to topple power structures at VW, Europe’s largest carmaker, failed and the economic crisis thinned profits and spooked banks.

If the deal does go through, the Porsche and Piech families (Porsche’s shareholders) will hold 50 percent of the shares in the merged company. Lower Saxony will keep its 20 percent share, and the emirate of Qatar might buy into the new company at anywhere from 14.9 to 19.9 percent.

None of this presumably will change the cars or their merchandising all that much. But watch out for the stock: At press time, both companies’ shares were down about 8 percent.

Is it over? We think the deal will go through and the government will make an accommodation on the taxes. What do you think?

—jgoods

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