Porsche takeover will make Volkswagen world’s number one

Porsche takeover will make Volkswagen world’s number one

Berlin: Europe’s auto major Volkswagen is set to become the world’s number one, pushing Japan’s Toyota to the second place, by taking over sports car manufacturer Porsche.

The boards of directors of Volkswagen and Porsche endorsed the acquisition on Friday last week, ending years of takeover struggle between the two German automobile giants, partly owned by two estranged family clans.

Porsche, which made an unsuccessful bid to take over Volkswagen earlier this year, would now become the 10th brand of the VW family.

Until recently, Porsche was controlled by Porsche Holding AG, a listed company owned by the family of VW chairman Ferdinand Piech, a grandson of the Porsche founder Ferdinand Porsche, and by the Porsche family.

Porsche’s attempt to take over the much bigger Volkswagen backfired and its CEO Wendeln Wiedekind had to leave in July. It suffered heavy losses largely due to its unsuccessful bid.

Porsche racked up huge debts to get 51% stake in Volkswagen, but fell short of the 75% stake needed to take over the company when it could not raise the money needed due to the global financial crisis and drop in car sales.

In August, the two families buried their differences and agreed to a fusion in order to protect their stakes in the company.

In terms of the number of cars sold, Volkswagen and Porsche are already the world’s number one, according to a market study. The two companies sold over 4.4 million cars world wide during the first nine months of this year compared to 4 million cars sold by Toyota.

Ford-Mazda had combined sales of 3.7 million cars. Financially troubled former world number one General Motors of the United States sold 3.6 million cars.

The fusion between the two companies is being planned in two Phases. Volkswagen will take-over 49.9% of Porsche till the end of 2009 and it will be completed by 2011. Porsche will continue to operate as an independent company within the VW family.

Besides taking over Porsche, Volkswagen also acquired on Friday the insolvent manufacturer of auto components and convertibles Karmann.

The VW plans to build small cars from 2014 at Karmann’s production plant in Osnabrueck, in northern Germany.

Volkswagen plans to invest 25.8 million euros in the next two years with focus on Germany to build up Porsche and Karmann and to strengthen the company’s position in world markets, VW management announced after the board meeting at its headquarters in Wolfsburg.

It intends to produce a new small new car under the brand name Karmann.

A part of the new investments planned will be spent on developing new environment friendly cars, innovative technologies and new production plants, especially abroad.

Market analysts say that both companies will benefit from the deal. With the support of Volkswagen, Porsche will be able to repay its debts amounting to more than 10 billion euros.

Volkswagen would have become susceptible to hostile takeover bids if Porsche had sold its stake.

Porsche is also an asset for Volkswagen because of is good image and experience in marketing, which are important above all in the US market.

The two companies together will have the broadest range of brands and new models among all leading auto makers, the analysts say.