Overstretched Porsche agrees to VW merger

Porsche and Volkswagen agreed on Wednesday to merge into a new German automobile giant – putting a new twist on the indebted luxury carmaker's attempted takeover of the much larger VW.

Overstretched Porsche agrees to VW merger
Photo: DPA

After weeks of “intensive talks” between the boards of both companies, Porsche’s family of owners “argued for the creation of an integrated car manufacturing group,” Porsche said in a statement.

The merged group would have 10 separate auto brands under one management in an “integrative leading company,” said the statement, issued after a meeting of the two firms and Porsche’s owners in Salzburg, Austria.

“On this basis both companies Volkswagen and Porsche (will now) intensify the talks in a joint working group,” it added. “It is the aim to develop a corresponding basis for decision-making on the future structure of the common group within the next four weeks.”

Volkswagen issued a separate statement hailing the decision of the Porsche and Piech families, owners of the Porsche group, to forge a merger. The announcement came amid major shifts in the world auto industry brought on by the financial and economic crisis that has hit demand and crippled many manufacturers.

US car giant Chrysler filed for bankruptcy last week, opening the way for Italian champion Fiat to take a stake in it. Fiat has also been linked to a potential takeover of Opel, the Germany-based arm of US company General Motors.

Stuttgart-based Porsche already holds a majority stake in Volkswagen (VW) and made an audacious takeover bid for it three-and-a-half years ago. Press reports had said last week that VW was considering a counter bid for Porsche, which is €9 billion ($11 billion) in debt. As the largest carmaker in Europe, VW is also by far the bigger company.

The Porsche parent group owns a little more than 50 percent of VW after having boosted its stake in January, and had aimed to raise its stake to 75 percent until it found itself battered by the global economic slowdown.

The German state of Lower Saxony, which has a one-fifth stake in Volkswagen, will take part in the new working group as well as employees’ representatives, the Porsche statement said.

Long common history

The two carmakers have a shared family history that stretches back decades. When Nazi leader Adolf Hitler hatched plans for a popular “people’s car,” or Volkswagen in German, he turned to his Austrian compatriot Ferdinand Porsche.

Porsche set up shop in Germany and designed the iconic Beetle, the first and best-known Volkswagen model.

When Volkswagen was taken over by the Allies after the war and nationalised, Ferdinand Porsche set up his own company in the southern city of Stuttgart.

For the next several decades Porsche and Volkswagen, based in the northern city of Wolfsburg, went their separate ways. But following the arrival of Ferdiand Piech to Volkswagen’s management, the companies began to slowly move towards one another.

The grandson of Ferdinand Porsche, and co-inheritor of the luxury automaker, Piech began his career at Porsche before moving to Volkwsagen’s Audi marque, then Volkswagen itself.

Piech climbed the management ladder to become the head of the Volkswagen group from 1993 to 2002.

Widely respected in Germany – where he is viewed as the patriarch of the auto industry – Piech remains on VW’s supervisory board, all the while one of the main shareholders in the family holding company which controls Porsche.

In 2005, the destinies of the two companies began to approach as Porsche began to amass a stake in Europe’s top automaker.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


From lizards to water, eco-bumps snag Tesla’s giant Berlin car factory

In the green forest outside Berlin, a David and Goliath-style battle is playing out between electric carmaker Tesla and environmental campaigners who want to stop its planned "gigafactory".

From lizards to water, eco-bumps snag Tesla's giant Berlin car factory
Tesla's gigafactory outside the doors of Berlin. dpa-Zentralbild | Patrick Pleul

“When I saw on TV that the Tesla factory was going to be built here, I couldn’t believe it,” said Steffen Schorch, driving his trusty German-made car.

The 60-year-old from Erkner village in the Berlin commuter belt has become one of the faces of the fight against the US auto giant’s first European factory, due to open in the Brandenburg region near Berlin in July.

“Tesla needs far too much water, and the region does not have this water,” said the environmental activist, a local representative of the Nabu ecologist campaign group.

Announced in November 2019, Tesla’s gigafactory project was warmly welcomed as an endorsement of the “Made in Germany” quality mark – but was immediately met with opposition from local residents.

Demonstrations, legal action, open letters – residents have done everything in their power to delay the project, supported by powerful
environmental campaign groups Nabu and Gruene Liga.

Tesla was forced to temporarily suspend forest clearing last year after campaigners won an injunction over threats to the habitats of resident lizards and snakes during their winter slumber.

READ MORE: Is Germany’s Volkswagen becoming ‘the new Tesla’ as it ramps up e-vehicle production?

And now they have focused their attention on water consumption – which could reach up to 3.6 million cubic metres a year, or around 30 percent of the region’s available supply, according to the ZDF public broadcaster.

The extra demand could place a huge burden on a region already affected by water shortages and hit by summer droughts for the past three years.

Local residents and environmentalists are also concerned about the impact on the wetlands, an important source of biodiversity in the region.

Tesla Street

“The water situation is bad, and will get worse,” Heiko Baschin, a spokesman for the neighbourhood association IG Freienbrink, told AFP.

Brandenburg’s environment minister Axel Vogel sought to play down the issue, saying in March that “capacity has not been exceeded for now”.

But the authorities admit that “the impact of droughts is significant” and have set up a working group to examine the issue in the long term.

The gigafactory is set to sprawl over 300 hectares – equivalent to approximately 560 football fields – southwest of the German capital.

Tesla is aiming to produce 500,000 electric vehicles a year at the plant, which will also be home to “the largest battery factory in the world”,
according to group boss Elon Musk.

In a little over a year and a half, swathes of coniferous forest have already been cleared to make way for vast concrete rectangles on a red earth base, accessed via the already iconic Tesla Strasse (Tesla Street).

German bureaucracy

The new site still has only provisional construction permits, but Tesla has been authorised by local officials to begin work at its own risk.

Final approval depends on an assessment of the project’s environmental impact – including the issue of water.

In theory, if approval is not granted, Tesla will have to dismantle the entire complex at its own expense.

But “pressure is being exerted (on the regulatory authorities), linked to Tesla’s significant investment”, Gruene Liga’s Michael Greschow told AFP.

In early April, Tesla said it was “irritated” by the slow pace of German bureaucracy, calling for exceptions to the rules for projects that help the environment.

Economy Minister Peter Altmaier agreed in April that his government “had not done enough” to reduce bureaucracy, lauding the gigafactory as a “very important project”.

Despite Germany’s reputation for efficiency, major infrastructure projects are often held up by bureaucracy criticised as excessive by the business community.

Among the most embarrassing examples are Berlin’s new airport which opened last October after an eight-year delay and Stuttgart’s new train station, which has been under construction since 2010.

Brandenburg’s economy minister, Joerg Steinbach, raised the possibility in February that the Tesla factory could be delayed beyond its July planned opening for the same reason.

SEE ALSO: Tesla advertises over 300 jobs for new Gigafactory near Berlin