VW may drop a merger and buy Porsche’s carmaking business

Article by Christian A., on November 16, 2011

The two-year attempt of Volkswagen AG to merge with Porsche SE is at risk of being dismissed as taxes and legal problems block plans to unite Ferdinand Porsche's legacy. According to two people who are familiar with the matter, the supervisory board of the largest automaker in Europe will consider options to the 2009 merger deal at a meeting on November 18, which is the final scheduled gathering for 2011.

The insiders, who requested anonymity, further revealed that VW may dismiss a merger and instead purchase the vehicle manufacturing unit of Porsche in order to avoid more delays in cooperation.

Analyst Juergen Pieper at Frankfurt-based Bankhaus Metzler commented that the structure of VW-Porsche in the future "has been hanging over their heads for some time." Pieper added that it is in the best interest of VW to "achieve clarity" on how to proceed. Porsche has 51 percent of VW common stock. On the other hand, VW owns 49.9 percent of Porsche's automaking unit.

CEO Martin Winterkorn of VW is seeking to merge his company with the Porsche vehicle business to reinforce his aim of outperforming Toyota Motor Corp. and General Motors Co. as the largest vehicle company in the world.

The sports vehicle manufacturer posted operating profit equivalent to 19 percent of sales during the first three quarters of 2011. This is more than double VW's 7.7 percent margin. Sales of Porsche vehicles increased by 28.2 percent in year-on-year figures to 100,391 units in the first ten months. The company is targeting sales of 200,000 vehicles by 2018.

Topics: vw, porsche

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