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Porsche denies VW in 'soapie' saga

2009-06-30 07:11

Lenaig Bredoux

A war of wills between Volkswagen and Porsche escalated on Monday as the stricken luxury sportscar maker spurned an offer from VW for a stake in its auto business.

"There is an offer by Volkswagen. For us it is not a practical solution," a Porsche spokesman told AFP.

Only a few months ago, it was the other way round as Porsche, having audaciously built up a 51% stake in VW, sought full control of the much larger firm.

Buying up the interest in VW, which is Europe's biggest carmaker, partly through risky stock market instruments, left Porsche crushed under some nine billion euros (12.7 billion dollars) in debt.

Porsche threw in the towel in its attempt to take over VW in late May as the two firms announced instead that they would seek a merger.

But relations have since deteriorated between the Porsche and the Piech clans who control the two companies, and in particular between the cousins who head the firms' respective boards, Ferdinand Piech and Wolfgang Porsche.

Porsche loan request may be rejected

In a humiliating turnaround for formerly high-flying Porsche, once the biggest success story of the German car industry, the firm has even gone cap-in-hand to the government seeking a 1.75-billion-euro emergency loan.

The request looks set to be rejected because Porsche's woes are not the result of the financial crisis, meaning it fails to qualify for government help to firms hit by the global recession and through no fault of their own.

Porsche has also turned to Qatar for help - talks which are now "in the final stretch," the Porsche spokesman said on Monday, although it was unclear what form an investment by the Gulf state might take.

Piech and Wolfgang Porsche disagree on how to get Porsche out of its current predicament.

Piech would like to merge the two companies, while Wolfgang Porsche backs Wendelin Wiedeking, the flamboyant head of Porsche who rescued the company from oblivion and turned it into one of the world's most profitable firms.

Wiedeking, one of the key architects of the attempted VW takeover, wants to keep his company independent - and save his job.

The latest twist came at the weekend with Spiegel magazine reporting that VW had presented a merger proposition that involved VW taking a stake of 49.9% in Porsche's car business for three to four billion euros.

Wolfgang Porsche issued a statement describing an ultimatum reportedly set by VW to accept its offer on Monday as "blackmail."


"We will not give in to such pressure or blackmail.... The 21st century is not the time for ultimatums. We wonder what the whole matter is really about and whether the focus is still on our common cause at all," he said.

VW denied setting any ultimatum and declined to comment further.

Porsche, meanwhile, said that the offer had been put to Wolfgang Porsche but not to the firm's board, according to the spokesman.

He added that a loan for 10.75 billion euros negotiated with a group of banks would have to be renegotiated "immediately" if it had accepted VW's offer.

Tim Urquhart, auto analyst at IHS Global Insight, said that the power struggle had "plumbed new depths" and that the infighting "is starting to look somewhat ridiculous."

"At the very least it appears that developments over the weekend suggest that relations and communication between the respective management teams of VW and Porsche have hit an all-time low," Urquhart said.

"What was already a difficult negotiation is rapidly descending into farce and serious harm is being done to the reputations of Porsche and VW as a result."

Christian Wulff, premier of the state of Lower Saxony, which owns a 20% stake in VW, said he was "a bit annoyed" and called on firms to "stop playing 'Dynasty' and 'Dallas'," referring to the 1980s soap operas.


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