Reasonable option

Porsche and Volkswagen agree to merge

Following FIAT's loud announcement of its intention to create a superconcern in Europe together with General Motors and Chrysler, the German manufacturer of expensive sports cars and SUVs Posche and the largest European automaker Volkswagen announced an impending merger. This fundamental decision was made after a meeting of Porsche shareholders and executives of the two companies, according to a statement from both companies. As a result, the German stable, which owns 51% of Volkswagen shares, refused to increase its stake in VW to 75%, proposing a compromise option - an “integrated group” that produces cars under ten different brands. In Germany, these plans were called “reasonable,” which looked somewhat more modest than the passionate assessments of the Italians, who characterized the possible merger of FIAT and Opel (part of GM) as “a union made in heaven.” “This is not a wedding sanctified by heaven, but considerations of reason,” said Porsche CEO Wendelin Wiedeking, speaking to his automaker’s workers in Stuttgart yesterday. “We still want to create the best car company in the world.”

So far, specific details of the deal have not been announced. They should be worked out over the next month with the participation of representatives of the Porsche and Piech families, which own 100% of Porsche shares, representatives of the trade unions of both concerns, as well as the German state of Lower Saxony, which owns 20% of Volkswagen shares. It is only known that in the new auto concern Porsche will continue to retain independence in matters of running its business. “The independence of all brands, as well as Porsche as a whole, will be ensured,” the company said in a press release. However, according to one of Vremya Novostei's sources familiar with the situation, the main topic of discussion in the near future will be the question of who will have more influence on the board of the new company - representatives of VW or Porsche.

Porsche has been increasing its stake in VW for the past 3.5 years. In January, Porsche, using options, collected 51% of VW shares, but said that the company plans to increase the stake to 75%, after which the concern would have access to and control over Volkswagen's cash reserves. The global financial crisis did not allow the idea to be realized. Having spent about $23 billion on buying VW shares, the company earned a headache in the form of debt in the amount of $9 billion and big problems with its repayment, and increasing the share became an unfulfilled dream for the German stable.

However, the already existing stake in VW brought Porsche significant income. Thus, in the first financial half of the year ending January 31, 2009, Porsche increased its net profit more than fourfold, to 5.55 billion euros compared to 1.26 billion euros a year earlier. And the increase was primarily due to income from investments in Volkswagen.

Publicly traded Porsche will increase its capital by up to £4.5 billion ahead of the creation of a new holding company, according to sources in the Financial Times. The combined company, they said, may also try to attract outside investors.

However, the main thing in creating a new alliance will not be finances, but personnel issues. Even in the middle of last year, the process of increasing Porsche's share in VW faced numerous problems, primarily due to uncertainty about the role in the single company of the federal state of Lower Saxony, which is the second shareholder of Volkswagen. Also a stumbling block in the creation of Porsche-Volkswagen was a dispute lasting for many months between the top managers of both companies about the upcoming division of posts.

So far, nothing is known about personnel changes in companies, but today no one can deny that they will undoubtedly take place. The main question today is whose scales will tip?

The largest American automaker General Motors wants to receive at least 30% of FIAT in exchange for the sale of its divisions in Europe and Latin America to the Italian company, the New York Times reported. At the same time, the head of FIAT, Sergio Marchionne, expressed his readiness to transfer no more than 10% of FIAT shares to GM. As you know, the Italian concern is striving to take one of the dominant positions in the global automobile market by acquiring a 20% stake in Chrysler and GM divisions, primarily German Opel. As Bloomberg reported, citing GM Chief Financial Officer Ray Young, the concern will require additional government assistance in the amount of $2.6 billion in May. GM has already received $15.4 billion from the state, but these funds did not affect the company’s financial condition . Thus, according to the results of the first quarter of 2009, GM recorded a net loss of $5.9 billion compared to $3.3 billion for the same period in 2008. INTERFAX

Irina TSYRULEVA