Volkswagen and Porsche to merge into a new German vehicle giant

Luxury sports car maker Porsche and Europe's biggest auto seller Volkswagen agreed on Wednesday to merge into a new German vehicle giant, the latest move in a mass reshuffle of the industry.

After weeks of "intensive talks" between the boards of both companies, Porsche's family of owners "argued for the creation of an integrated car manufacturing group," Porsche said in a statement.

The merged group would have 10 separate auto brands under one management in an "integrative leading company," said the statement, issued after a meeting of the two firms and Porsche's owners in Salzburg, Austria.

"On this basis both companies Volkswagen and Porsche (will now) intensify the talks in a joint working group," it added.

"It is the aim to develop a corresponding basis for decision-making on the future structure of the common group within the next four weeks."

Volkswagen issued a separate statement hailing the decision of the Porsche and Piech families, owners of the Porsche group, to forge a merger.

The announcement came amid major shifts in the world auto industry brought on by the financial and economic crisis that has hit demand and crippled many manufacturers.

US car giant Chrysler filed for bankruptcy last week, opening the way for Italian champion Fiat to take a stake in it. Fiat has also been linked to a potential takeover of Opel, the Germany-based arm of US company General Motors.

And now with the latest from this morning, GM may be seeking a chunk of the new Fiat-Chrysler in exchange for Fiat running its Opel subsidiary around the world. Sigh.

Overreaching is nothing new in the auto industry, and in this latest ten-year cycle, the players who remain on the sidelines get left out of the headlines. But while alliances like Renault-Nissan struggle with integration and making their virtual mergers work, the temptation to create megacompanies with constellations of brands still hold.

Stuttgart-based Porsche already holds a majority stake in Volkswagen (VW) and made an audacious takeover bid for it three-and-a-half years ago. Press reports had said last week that VW was considering a counter bid for Porsche.

In the next four weeks, a joint working group, whose members come from Volkswagen and Porsche will consult extensively with the region of Lower Saxony and manpower from both companies to build future organizational structures.The Board of Management of Volkswagen will do everything in its power to support this process.

Commenting on the result of the meeting of the family shareholdes Prime Minister of the State of Lower Saxony Christian Wulff said: "We are ready for the conversation that should be conducted with all involved persons at Porsche, Volkswagen, the workers' representativtes and the State of Lower Saxony soon. The opportunity is there to continue writing the track records of VW and Porsche together in the future."

Volkswagen works council chief Bernd Osterloh said Thursday that ``the road to an integrated company is completely open," but stopped short of calling it an outright merger.

"(A) merger is only one way. It appears that the terms merger and integration are being used interchangeably here. And, because of VW's bylaws alone, we are more than skeptical that the way for a merger can be made clear at all," Osterloh said Thursday at a conference in Wolfsburg, which CEO Martin Winterkorn also attended.

Volkswagen AG shares were up 1.3 per cent to euro235.70.

VW is by far the bigger company, with the biggest sales of any car firm in Europe -- 15 times larger than its smaller German peer, which is nine billion euros (11 billion US dollars) in debt.

The Porsche parent group owns a little more than 50 percent of VW after having boosted its stake in January, and had aimed to raise its stake to 75 percent.

The German state of Lower Saxony, which has a one-fifth stake in Volkswagen, will take part in the new working group as well as employees' representatives, the Porsche statement said.

Ref.:
http://news.smh.com.au/
http://www.atzonline.com
http://blogs.thecarconnection.com/
http://www.thestar.com/

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