Porsche drowning in debt?
2009-06-04 12:44
As Porsche announces it wants a €1.75bn loan from German state bank, KfW, we wonder whether anybody in Zuffenhausen has a clue how much trouble they are in.
Despite a stellar product range, industry leading manufacturing efficiency and strong sales, Porsche may come unstuck due to an extraordinarily stubborn desire to take over VW. A plan which has backfired spectacularly during the first quarter of this year.
The aborted take over of VW has left Porsche with 51% of the voting stake in Europe’s largest car maker by sales, yet saddled it up with over €12bn in debt too, which means pretty chunky interest payments.
Those interest payments are so chunky, in fact, current sales levels (in a heavily depressed market) are only enough to service the cost of debt, not pay it off.
For three days in March, Porsche tethered on the brink of bankruptcy, with only a debt servicing loan of €700m from VW keeping Zuffenhausen’s doors open. Porsche aims to sell 80 000 vehicles by the end if its fiscal year on 31 July, which should turn a tidy €700m operating profit - ironically.
Not even the miraculous Paris-Dakar conquering 959 could successfully scale the mountain of debt Porsche is in currently in.
In a time where few manufactures are actually running at operational profitability, Porsche’s dire debt situation being completely self-inflicted is simply tragic.
Even with the €1.75bn loan from KfW, development to prolong product life cycles and design new cars - engineering purity being Porsche's product lifeblood and sales appeal all wrapped up in one - could quickly escalate costs scales.
How Porsche is going to manage paying of its mountain of VW induced debt and keep the company’s exceptional engineering focus funded, is almost impossible to see.
Porsche's boss, and Europe's best paid CEO, Wendelin Wiedeking could see the current state of affairs destroying his legacy. This centred around Wiedeking turning the sportscar maker from near disaster in the early 1990s to record profatibility - and now, record debt...
