Dr. Ferdinand Porsche created the Volkswagen or ‘people’s car’ for the Hitler Reich and now 70 years later Porsche is looking to take back its origins by buying more of Volkswagen, adding to its current 31% holdings.
Volkswagen includes its namesake line of mass production cars models plus the luxury and exotic brands of Audi, Bentley, Lamborghini, Bugatti, and trucks Scania and MAN.
Porsche wants to build on its luxury sports car brand by adding Volkswagen’s stable to its own lineage. The appeal of having lower level models is less clear.
There could be some problems to ownership though. VW is protected by German regulations from hostile takeovers, and to ensure local assembly and jobs in Saxony. There is resistance from VW unions to a takeover. And purchase of a large automaker by a smaller one is unusual.
A new law would allow shareholders with a 20% stake to block board decisions. Lower Saxony already has 20.1%. Normal German law provides for a 25% stake to object, so Porsche is lobbying against the new rule. Some of these issues also go against European Union legislation.
Other obstacles are the slowdown in the US market where the majority of Porsche cars like the 911, Boxster, Carrera, and Cayman are sold, and foreign new car sales are affected by the currency exchange rate.
Although Porsche has hedged it’s currency risk through 2013 they are prepared to consider building Porsche cars in the US if the dollar stays weak relative to the euro.
Locally in Europe increased regulatory pressure is being forced on car makers to lower their carbon footprint, which is a bigger challenge for high performance vehicles that use more gasoline. Porsche is testing a Cayman hybrid prototype currently but admits it is a niche product.
