Porsche Bid for VW May Be Dead

May 23, 2008
One of the automotive world’s oddest marriage bids may have been blocked by the German government. Regulators have taken steps to protect state control of Volkswagen, potentially ending a bid by sports carmaker Porsche to take control of the larger, mainstream brand.

The ties between the two companies date back decades; Ferdinand Porsche designed the original VW Beetle before developing his own, eponymous car company, and more recently, the German marques collaborated on the development of sporty SUVs that became the Volkswagen Touareg and Porsche Cayenne. But until recently, the sports car manufacturer was always the weaker, if more exclusive, brand.

In recent years, however, Porsche’s star has ascended. It is today one of the world’s most profitable automotive companies, with margins that even Japanese giant Toyota has to envy. That has led the cash-rich Porsche to push for control of its German counterpart.

But VW executives have been cool to the idea, as have officials in Lower Saxony. The German state holds a 20 percent stake in the company - which is a major source of jobs and tax dollars – but under the so-called Volkswagen law, it also has dominant voting rights, which gives it the power to veto any takeover bid.

That runs afoul of European Union regulations, but reports out of Germany say the federal government has decided to ignore the EU and will permit the state to maintain its dominance. Barring a battle in European courts, the Porsche bid now appears to be scuttled.

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