It has always been a dream of mine to own a Porsche. When I was 21 years old and bought a used 1981 VW Rabbit GTI little did I know that 13 years later I would be able to say I did in fact own a Porsche (sort of). Yes it is now official, the German automaker Volkswagen (VW) has been taken over by German luxury automaker Porsche. Porsche has announced it has gone over the 50 percent threshold in the company’s common stock with 50.76 percent and promises more buying of stock to come.
The takeover by Porsche represents more than three years of planning. Porsche, which is famous for its 911 sports car, made its intentions known in 2005 that it was planning on buying its way to owning VW. Porsche planned on reaching the 50 percent common stock mark last year but was forced to delay its plan as rapid market speculation sent share of VW to more than 1000 euro (about US$1350) per share which briefly made VW the largest car maker in the world according stock valuations. VW shares currently trade at around 250 euro (though currently surging on the news) which is within the range that Porsche set for itself (200-250 euro) when they set out for the takeover (source: news.yahoo.com).
Porsche has faced severe scrutiny as well as opposition from the unions as the unions feel that the takeover could mean major factory layoffs. Porsche has promised however that it is in the company for the long-term. And even though Porsche owns over 50 percent of VW they still need to acquire more shares so that a total financial control will be possible. Porsche plans on increasing its stake in VW to 75 percent this year which would allow them to have said total control of the company (source: news.yahoo.com).
The wrinkle for Porsche is that in Germany, a minority investor that owns 25 percent of a company’s shares can block strategic decisions which would normally be no problem as Porsche plans on reaching the 75 percent level of stock ownership. But in the case of VW that level is currently set by law at 20 percent, the amount owned by the state of Lower Saxony, where VW is based. Porsche has already challenged the “VW law” and has received support from the European Commission who has threatened to take Berlin to European Court if the matter is not resolved (source: news.yahoo.com).
There is no telling how the two German Auto makers will do while trying to co-exist. They are polar opposites when it comes to the vehicles they manufacture. Porsche is known for its ultra-luxury (and pricey) vehicles while VW is known for its more economical vehicles that appeals to the masses and not just the uber-rich. Time will tell, but it is official, Porsche has successfully taken over Volkswagen by going over 50 percent ownership of common stock with the promise of more buying to come.