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Little Porsche Grabs Big VW To Protect Porsche

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Los Angeles Times

Published: November 27, 2008

In October, Porsche announced that it had acquired a nearly 43 percent stake in Volkswagen with an option to buy 32 percent more. Without anybody noticing, Porsche, maker of scarcely 100,000 cars per year, had cornered a 75 percent position in VW, which cranks out nearly 6 million vehicles.

And since nobody guessed how large Porsche's position was beforehand, short sellers were suddenly caught with their pants down, driving VW stock into the ionosphere. VW shares quintupled, peaking at over 1,000 euros and making VW, briefly, the most valuable company in the world.

Needless to say, Porsche found itself in the catbird seat, able to sell part of its position without having to cede control of the bigger carmaker. It was a great example of the business acumen of a company that has the highest profit margins in the world of cars.

How high? About 12 percent high, according to Klaus Berning, a member of Porsche's board and head of sales and marketing for the company, who helped introduce Porsche's new Boxter and Cayman models at the Los Angeles Auto Show last week.

But the highlight of his speech was the revelation that, incredibly, Porsche's acquisition of VW isn't about the money. Apparently it's about saving Porsche. "Our VW strategy is part of protecting Porsche," Berning said. "It is our guarantee that Porsche will remain Porsche."

The startling remark - that without Goliath, David was imperiled - largely fell on deaf ears because the audience was more concerned with the new double-clutch gearbox on display than a multibillion-dollar acquisition, or the fact that one of the company's execs suggested that hugely profitable Porsche was somehow in trouble.

Afterward, Berning elaborated. Apparently, Porsche is not on the verge of bankruptcy. Instead, the acquisition would allow the smaller automaker to rely on VW's considerable engineering capacity to help it develop a new hybrid drive train for its Cayenne sport utility vehicle, as well as on other technological advances in development.

"A company of our size needs a technological partner," Berning said. "To secure our projects, we had to make sure VW would not go to some sort of investment fund.

"That we made money out of the hedges is a nice thing," Berning continued, "but the main objective was to get the technology."

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