Overclocker

Date posted: 02-21-2007

ZUFFENHAUSEN, Germany — Porsche appears poised to fulfill its plan to wrest control of the Volkswagen Group following the capitulation of its biggest opponent, the German state of Lower Saxony. The saga is a high-stakes push for power in the top echelons of the German carmaker.

A landmark European Union court ruling has repealed a hotly contested law originally designed to protect the German company from a hostile foreign takeover. Lower Saxony, using the law, had effectively capped Porsche's control within the supervisory board although the company is Volkswagen's biggest shareholder. In fact, the law had been known as the "Volkswagen law" because of its unique standing in legal circles. It only permitted Porsche to exercise 20 percent of voting rights on the VW supervisory board, even though the automaker holds more than 27 percent of its shares.

After heavily opposing Porsche's plans to extend its reach on Volkswagen — which also controls the Audi, Bentley, Seat and Skoda brands — in recent months, the outspoken premier of Lower Saxony, Christian Wulff, has indicated he will no longer block moves that are likely to see it take both the chairmanship and a third seat on the company's supervisory board in coming weeks. The political move is seen as paving the way for Porsche to take complete control of Europe's largest carmaker.

Porsche has steadily increased its holding since buying into Volkswagen in September 2005. It now controls a 27.4 percent stake. Significantly, it has also gained the all-clear from VW's supervisory board to increase this to as much as 29.9 percent — something automotive industry analysts expect to see in coming months as Porsche Chairman Wendelin Wiedeking seeks to obtain a greater say in VW's day-to-day operations.

By making the "Volkswagen law" redundant, the European Union has paved the way for Porsche to exercise its full voting rights. At the same time, it clears the way for Ferdinand Piλch, a controlling shareholder of Porsche and a stern Wulff opponent, to remain chairman of Volkswagen while holding Porsche's third supervisory board seat.

Still, if rumors circulating in European investment circles are to be believed, we may not have heard the last of Wulff yet. According to Inside Line sources, he has been in talks with investors in an attempt to oust Piλch when his term on Volkswagen's supervisory board comes up for renewal in April.

News of Porsche's victory over Lower Saxony comes as Volkswagen announced that 2006 profit earnings had more than doubled over 2005 and that vehicle sales across the group have risen by a sturdy 9.4 percent to 5.7 million, driven mainly by gains at Audi, Bentley and Skoda.

What this means to you: Porsche once prided itself in victory on the racetrack. These days it seeks victory in investment circles — but at what cost to its image as a maker of some of the world's most exciting sports cars?

Source: http://www.edmunds.com/insideline/do...ticleId=119679

mavericck

This is good news to me.

Lexmex

I think this is also a good move. Kind of wondered what direction VW was going over the past few years.