Matchmaking - German Car Makers Talk About Mergers
Porsche and VW could merge soon. Currently both companies negotiate about this option. Another one is that VW takes Porsche over. At first sight both appear strange. After all the holding Porsche SE is possessing over 50% of the Volkswagen stocks. So why join? Eventually the matter is caused by two issues. First one is the VW law.

It guarantees Lower Saxony a blocking minority, even though they just hold a 20% share in the company, which headquarters in this state. So Porsche cannot dispose of VW's money. That was why they brought the law to trial at the European Court and, they even won the lawsuit. But the German government modified that law a bit, keeping the decisive article substantially intact.

So Porsche is now forced to sue against the new version of the law and can get the money yet. Problem was and is that they need it to repay the credits of the VW takeover, which is the second issue in this concern. Meanwhile, recession caused a significant decrease in car sales and revenues as well as it has made credits dearer.

Both means a lack of money for Porsche and make their debts a problem for them. When both merge to one company, the debts of Porsche will be VW's debts too. This way Porsche would get rid of the trouble. The interesting thing is how much they have to pay to get saved. On the one hand, the Porsche family is possessing a share of more than 50% of the new group. But Lower Saxony's goodwill won't be for free and will require making concessions.

For Daimler and the BMW, on the other hand, a merger of VW and Porsche would worsen their situation. They might have reputable names in their portfolios, but the numbers of produced cars are too low to achieve synergies as Wolfsburg does. Meaning, production is too expensive, compared to the costs of the Volkswagen Group.

That is mainly the reason why rumours came up saying Daimler and BMW will merge. Board members of the company from Munich have now denied this, as well as a common use of platforms and engines. Also, there will be no exchange of stocks, as other sources reported.

Nonetheless, the German premium car makers have agreed cooperating in buying components. Actually BMW and Daimler are financially sound the current global economic crises however intensifies the problems they have because of their size.

Firms such as VW and Toyota may take an advantage of being beigger, especially as alternative drives requires immense research and development efforts. Approaches and the old rivalry of BMW and Mercedes-Benz seem still too big for a closer collaboration. Both are still comprehending themselves as archenemies yet.

Hard to say whether this will change or not. At the moment, situation isn't bad enough for a fraternisation, obvioulsy. Mabye this will occur one day. Time will tell. We, at any event, don't want these things to change!

Yes, that are unexpected developments. But they're lastly just results of the recent situation on the car markets and the financial markets. Compared to many other countries' car makers, however, the German industry is in good condition. All those considerations and negotiations aim at preserving them from getting into that trou-
ble the others, expect from a few Asian companies such as Toyota, are already in.

< Contents Page

German Car Groups

Volkswagen AG
- Audi
- Bentley
- Bugatti
- Lamborghini
- Skoda
- Volkswagen

Porsche SE
- Porsche
- Volkswagen AG
[Stake of over 50%]

Daimler AG
- Maybach
- Mercedes-Benz
- Smart

- Mini
- Rolls Royce