Volkswagen breaks off talks with Porsche
Published on: 17 May 2009 12:29 CET
A meeting to discuss merger plans scheduled for Monday has been canceled, the speaker said. He added, Porsche needs to decide internally “what they really want.”
Porsche is the biggest shareholder in Volkswagen, with a 51 percent stake, and had 75 percent of VW in its attempt to take over the company. But Porsche is €9 billion in debt from its takeover attempt and due to the financial crisis, is having difficulty rolling over some of the loans.
In a reversal of fortune, the two companies announced May 6, that discussions are under way about a merger of Porsche with Volkswagen, with the structure of the new company to be negotiated.
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 Ferdinand 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.
Porsche workers, concerned that a VW takeover may mean job cuts, will stage their first-ever strike Monday, Focus magazine reported online Saturday.
The state of Lower Saxony, which owns a 20 percent stake in VW and thanks to the so-called “VW Law,” possesses a veto over any of the carmaker’s decisions, is actively involved in the negotiations between Porsche and VW, some of which have taken place at Lower Saxony government offices in Hanover.