Porsche and VW reaffirm merger goal

By Edward Taylor and Tessa Walsh

FRANKFURT/LONDON (Reuters) - The squabbling cousins who run Porsche <PSHG_p.DE> and Volkswagen <VOWG.DE> appeared to bury the hatchet on Tuesday, agreeing to work together once more towards a combination of the two German carmakers.

Porsche Chairman Wolfgang Porsche and Volkswagen Chairman Ferdinand Piech put out identical statements saying an integrated automotive group remained their goal despite days of frosty stonewalling by VW's leader -- who is also a member of the family that controls Porsche.

"Both companies will advance efforts towards this goal in a constructive way and in mutual agreement with all the parties concerned," the two-sentence statement said.

The sudden thawing of relations came as Porsche cast a wide net in search of political and financial allies for its struggle to bolster its finances and revive the merger talks.

Volkswagen's powerful labour leader, Bernd Osterloh, said he was prepared to resume talks only if the extended family that controls Porsche makes clear its intentions.

Porsche, which holds nearly 51 percent of VW's voting stock, has been forced to scale down an attempt to seize full control of Europe's biggest carmaker and instead seek a merger whose details are supposed to be worked out by early June.

Porsche's 9 billion euros (7.9 billion pounds) in net debt built up for a VW takeover before car markets collapsed have made its finances a focal point of attempts to strike a deal.

Porsche in March tried to drum up 12.5 billion euros in loans to refinance its debt, but only managed to get 10 billion. Its lenders have committed only about 750 million euros of the extra 2.5 billion in loans it seeks, a banker familiar with the deal said.

A spokesman for the company said Porsche was "well on its way" to getting the additional loan.

Porsche was supposed to get its first debt rating by the end of this month, but these efforts are now on hold.

That move potentially delays efforts to shed light on its finances and increases its cost of borrowing.


In a boost for Porsche though, it got political backing from its home state of Baden-Wuerttemberg and said it was in "promising talks" with an outside investor. Porsche declined to elaborate on details about the potential investor.

The emirate of Qatar has expressed interest in the past.

Guenther Oettinger, the premier of Baden-Wuerttemberg, said he would do "everything legally and economically possible" to ensure that Porsche develops strongly.

He was responding to a newspaper report that said the state could provide Porsche with 2 billion euros in guarantees.

Oettinger said he was reviewing with Porsche how "stable development" can be ensured over the next one to two years.

Still, any deal struck between Porsche and VW will need the consent of Christian Wulff, the premier of VW's home state of Lower Saxony.

Lower Saxony owns just over 20 percent of VW, and by law can veto significant decisions at Europe's biggest carmaker.

Outside investors could own 30 percent of a combined Porsche/VW, a spokesman for Lower Saxony said, confirming remarks by Wulff.

Porsche could own just over 50 percent, with Lower Saxony retaining its 20 percent stake as well as the right to veto significant decisions, the spokesman added.

Porsche shares ended up 0.2 percent at 41.30 euros while Volkswagen shares slipped 2.2 percent to 220.05 euros before the statement came out. VW's more liquid preferred shares gained 4.2 percent to 49.15 euros.

(Reporting by Arno Schuetze, Jan Schwartz and Hendrik Sackmann; Editing by Andrew Callus)

Article Published: 19/05/2009