Porsche and VW Routes Converge

05 March 2008

STUTTGART: The world's most profitable carmaker Porsche is on the threshold of creating a new European automotive empire.

It has signalled its intent to take a controlling stake in German giant Volkswagen, which in turn has announced it will swallow up more than two-thirds of Swedish truck maker Scania.

Porsche has been steadily increasing its grip on VW over the last year and currently holds nearly 31%. The luxury sports-car maker won a European Union legal victory in October which ruled the German government must remove its longstanding cap on VW voting rights.

The latter has agreed to pay €2.9 billion ($4.4bn) £2.2bn) for a majority share of Scania, which will join a stable of marques that includes Skoda, Audi and Lamborghini.

The driving force behind the union of the German automaking powerhouses is Ferdinand Piech, controlling shareholder in Porsche and VW board chairman.

The two companies have stated, however, they will not attempt to force a merger.

A statement from Porsche ceo Wendelin Wiedeking and financial officer Holger Haerter says: "Volkswagen and Porsche will bundle their strengths in clearly defined cooperative projects and implement them to enhance profitability on both sides."

Wiedeking adds: "Our aim is to create one of the strongest and most innovative automobile alliances in the world, which is able to measure up to the increased international competition."

The second largest shareholder in VW is the German state of Lower Saxony, site of the company's headquarters. It holds a 20% stake which, together with Porsche's interest, means VW need not fear a foreign takeover.

Data sourced from Financial Times; additional content by WARC staff