Porsche/VW? What happened?

Stevie Dakota

Can anyone explained what is going on with VW and Porsche? Porsche gained control of VW by gambling big time on the markets, now they are nearly bankrupt and looking for backers?

What does this mean for either company?

The whole thing sounds like madness and has me totally confused.

If anyone can explain what happened with this story in 5 sentences or less you win todays prize!

T-Maxx

5 sentences?

Pfft, one word will do it.

Clue: Starts with a "r"

BlackWizard

"R" for Rover?

Rover will break away from Tata a buy both companies and move all the factories and engineering to Engerland. Do I win?

stealthyspeeder

Markets speculated that VW shares would drop in price.

Porshe bought lots of VW shares (subtley) as they reduced in price by leveraging their own finance, ending up with enough control of VW to launch a takeover bid.

This would increase the price of VW shares, so all the Hedge fund managers shat themselves and deserately started buying (the now very limited supply) of VW shares on the open market to cover their short postions.

Porshes assets increased, their value increased, now the leveraging they initaily used is putting financial strain on them.

Johnboy Mac

T-Maxx wrote: »

5 sentences?

Pfft, one word will do it.

Clue: Starts with a "r"

Recession?

I think maybe it's only part of the big picture. I'm of the understanding Porsche borrowed money to buy into VW. If so now it has to repay loans plus the recession is having a major impact on new car sales.

Barr

So from reading the above does this mean that Porsche now have control over VW ?

robbie99

Barr wrote: »

So from reading the above does this mean that Porsche now have control over VW ?

No. AFAIR, Porsche have effective control over something like 75% of the shares - a majority yes but substantial decisions need to be approved by an 80% majority. Some German local government owns 20% of the VW shares and can veto whatever they like and don't want to pass on this control.

Stevie Dakota

stealthyspeeder's post sounds well informed, although it's all a bit greek to me. Is Porsche in a bad way now, who owns who and what about VW?

Remember the old days when car makers just made cars?

Johnboy Mac

Barr wrote: »

So from reading the above does this mean that Porsche now have control over VW ?

From what I understand, yes they do. But there is seemingly going to be some blood spilt about actual management control.

peasant

Stevie Dakota wrote: »

who owns who and what about VW?

There are two families, Porsche and Piech (all related) who own varying amounts of both Porsche and VW, in some cases a bit of each. These two families also have clan infighting worthy of a Shakespeare drama.
Then there would be the state of Nordrhein-Westfalen Niedersachsen which owns a big chunk of VW, as well as the employees.

woodseb

it's lower saxony that holds the other 20% stake, porsche have around 50% and another 25% in options to take it to 75%, problem is that they are struggling to raise the cash to refinance the debt taken on to buy the 50% and pay for the remaining chunk. they don't want to go through with a full takeover until the EU force germany to remove the veto that lower saxony hold

Stevie Dakota

I need to lie down. On a related matter who shot JR?

stealthyspeeder

Stevie Dakota wrote: »

If anyone can explain what happened with this story in 5 sentences or less you win todays prize!

do I win todays prize?

woodseb wrote: »

it's lower saxony that holds the other 20% stake, porsche have around 50% and another 25% in options to take it to 75%, problem is that they are struggling to raise the cash to refinance the debt taken on to buy the 50% and pay for the remaining chunk. they don't want to go through with a full takeover until the EU force germany to remove the veto that lower saxony hold

Spot on!! and also on the options, that old big "R" has reduced Porsches ability to excercise the options that they hold, however without exercising them the value of their own stock will fall as it takes into account the value of Porshes assets (which include the strong VW holding), so if they get the cash they are in a very strong position, if they dont, they lose an awful lot, its a bit of a struggle for them at the mo as not to many big investment bodies (who would be the normal backers) are lending to firms that are leveraged to this extent.

peasant

Did I say Shakespeare ? I think I meant Machiavelli

http://autonews.gasgoo.com/auto-news/1010969/Piech-v-v-Wiedeking-Leaks-letters-lies-and-the-triple-witching-hour.html

Assume for a horrifying second that you are the chairman of the board of one of the world’s largest auto companies. You also own large chunks of a smaller auto maker. Your executive assistant brings in a letter from one of the top managers of that smaller automaker. The letter says you broke the law, you hurt the company, and he may hold you personally liable for the damage. To the tune of, oh, several billions. Euros. What would you do? Right. Send down security with a moving box and have the guy escorted to the factory gates. Ferdinand Piech, chairman of the board of Volkswagen, supervisory board member of Porsche, and one of the largest owners of Porsche received such a letter from Porsche CEO Wendelin Wiedeking. A month ago. Wiedeking still has a job. But the letter has been leaked to the press. The day before Wiedeking’s day of reckoning.

The Süddeutsche Zeitung is in possession of a personal letter from Wiedeking to Piech, sent on May 13 2009. Your guess is as good as ours who revealed the reading matter. A day before the epistle was express-mailed, Piech had publicly called Wiedeking a loser. A few days later, Piech had offered Wiedeking a job after Volkswagen had done a reverse takeover and gobbled up Porsche: The job came with conditions. “He would have to step several rungs down the ladder. He would have to be demure,” said Piech. In the olden days, this would have been cause for a duel with pistols. It turned into dueling letters.

Wiedeking is still in charge of Porsche and is still trying to find the money to finance and finalize the takeover of Volkswagen by Porsche. “Apparently, Piech did not get support for firing Wiedeking,” muses Der Spiegel after reading the Süddeutsche. The support for an execution of Wiedeking at Porsche must come from the other factions of the Porsche/Piech families ruling Porsche. So instead of firing Wiedeking, Piech wrote a letter back and denied all allegations.

The obviously premeditated leak is yet another chapter in the power struggle for the control of Volkswagen and Porsche. Porsche is looking at a debt of €9b and cannot complete the takeover of VW. They applied for a €1.75b government-backed loan, the application has not been decided. The Sheikh of Quatar is ready to buy 25 percent of Porsche, but he wants to have a say in the company also.

Today, Friday, is a day of double reckoning for Porsche.

Today, Porsche presents the numbers for the first 10 months of the 2008/2009 fiscal year. According to Reuters, “reported pretax profit at its core sports car business declined on the back of a sharp drop in vehicle sales and revenue in the first nine months of its fiscal year. Consolidated profit before tax would significantly rise, however, thanks to a considerable boost in earnings from cash-settled stock options that benefitted from a high underlying share price in Volkswagen ordinaries.” It may be the last time.

Today, Friday June 19, is triple witching hour in Germany. Most options Porsche holds on Volkswagen stock expire. Porsche either has to exercise them, which costs money. Or they go poof and result in a big loss. Reuters predicts a “potentially volatile session for Volkswagen shares on Friday due to the expiry of options, index options and futures on the Eurex derivatives exchange.”

The leaked letter exchange was strategically timed.