Thursday 15th February 2007

Porsche poised to take over VW

Legal wall around VW is ready to tumble

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Bugatti Veyron: still a VW

Porsche is about to take control of VW -- but Bugatti and Lamborghini appear safe from sell-off.

In 1960, the Volkswagen Law was passed that gave the company unique protection from take-over by placing a limit on voting shares and putting members of local government, Lower Saxony, on the board. But now Lower Saxony has given up opposing the EU-sponsored moves to remove this law, which was ruled illegal this week by the advocate general to the European Court of Justice.

What this means is that the law is almost certain to be repealed, and Porsche, the company's second-largest shareholder with an almost 30 per cent holding, will take the chairmanship and a third seat on VW’s supervisory board. Porsche owns 27.4 per cent of VW and is authorised by its board to buy up to 29.9 per cent.

It's personal too. The man opposing Porsche, Christian Wulff, is the premier of Lower Saxony and has frequently has opposed VW chairman Ferdinand Piëch's governorship of the company. He even once attempted to get him removed. But with Piëch's recent ousting of his opponents on the VW board, Wulff has given up.

This means Piëch, who also owns a controlling share of Porsche, can retain his chairmanship of VW. It also means Porsche doesn't actually need to buy more VW shares, since it effectively has control.

What it doesn't mean, however, is that VW will sell off its luxury sports car brands in favour of Porsche. Piëch appointee Martin Winterkorn, now chief executive of VW and previously the head of VW's Audi division, told German newspaper Suddeutsche Zeitung that VW had learned a lot from the engineering efforts of Bugatti in particular, as the Veyron went through its well-publicised and prolonged gestation pains.

This applied especially to aerodynamics. "A jumbo jet takes off at 250kmh, whereas a Bugatti remains safely on the ground at 400kmh," said Winterkorn.

The engineering know-how gained via this process means VW is unlikely to sell off the two marques, despite potential pressure from Porsche to be the sole top-end brand in the VW group.

[Dr S]

Let's expect a lot of fettling of product lines between the different sports car brands unless the non-Porsche ones are sold off. That has never been the best for customers as Aston/Jaguar demonstrated pretty well