Porsche says it does not want to acquire Audi.

[Mr. M]

No. Mercedes alone is already a sprawling automotive empire and as a brand, is an institution. Despite a decade of reliability issues, the Mercedes name remains an incredibly strong and aspirational brand.

If Chrysler was cut loose, even at a fire sale price, it would do great things for Benz in the long run. For them, going small can be the new big, and I have no doubts that they can turn things around if they didn't have so many external obligations nipping at their heels.

Do you think Mercedes will have problems withdrawing from Chrysler?

 

[Merc1]

Do you think Mercedes will have problems withdrawing from Chrysler?

At this point they might. It depends on how far along the next generation of vehicles are and more importantly how much is shared between the two companies. In their current state I don't think Mercedes would have any problems, they can still work together but have seperate pocketbooks.

M

 

[Deutsch]

The "Porsche wants Audi" thread

Could it be!?!?!?!?!!?!?!?!?!?!?!?!?!?!

Neil Winton: European Perspective

Porsche machinations at VW sow confusion about future

Spare a thought for the workers at Volkswagen as they contemplate the New Year. Like their counterparts at U.S. car manufacturers, they have been losing jobs and hard-won perks as profits disappear, undermined by fierce competition from Asia. But at least the remaining workers at Ford and General Motors have some vague notion about the direction and ownership of their companies.

Volkswagen's boss Bernd Pischetsrieder has been fired - he was dumped in mid-November - but officially doesn't leave until January 1, 2007. The new boss is former Audi CEO Martin Winterkorn, that much is clear.

But the future direction and ownership of VW, now with luxury sports-car manufacturer Porsche as its biggest shareholder, is clouded and may be contested. Investment banks are confused too; there seems to be a different VW theory every time you ask the question.

Firstly, there is the relatively simple rationale that Porsche, which recently raised its stake in VW to 27.4 per cent from 21.4 per cent, is simply trying to protect its future. VW makes bodies for the Porsche Cayenne SUV, and will produce bodies and crucial and expensive electronics for the upcoming Panamera sports car. Porsche has said it plans to raise its stake to 29.9 percent in VW, the highest point allowed under European law before triggering a takeover bid for the whole company. Holding this maximum stake is simply a sensible investment because it will effectively stop a hostile takeover of VW which might jeopardise the cozy production arrangement, at least that's the theory.

VW law

Why worry about a hostile takeover of VW; surely it is protected by the so-called VW law? That's true at the moment, but the law, which says that no shareholder can vote more than 20 percent of the equity, even if they hold more, is likely to be overturned when the European Court of Justice rules on the legality of the concept on Feb. 13. The VW law was introduced in 1960, when the then state-owned VW was returned to the private sector. Its home state of Lower Saxony was the largest shareholder until Porsche's recent foray into the stock market.

Other more controversial theories suggest that Porsche wants to take over all of VW, and to those who question the wisdom of a luxury manufacturer buying Europe's biggest mass car maker comes the suggestion that Porsche really wants to get its hands on Audi, VW's highly successful premium vehicle producer. Porsche would sell off the rump of VW's downmarket brands, and make off with Audi. Porsche/Audi would then present a formidable competitor to BMW and Mercedes.

Piech the key

All attempts to fathom out just what is going on at VW always return to one man -- Ferdinand Piech, the fearsome, relentless and single-minded Porsche family member who handed over the reins at VW to Pischetsrieder in 2002. Piech, the engineer and grandson of VW founder Ferdinand Porsche, ran VW as CEO for 10 years, before moving up to the supervisory board in 2002 as chairman. Piech has a reputation as a top-flight engineer, but his financial legacy to Pischetsrieder wasn't so strong.

According to Professor Ferdinand Dudenhoeffer, managing director of automotive analysts B&D Forecast, of Bochum, Germany, Piech is motivated by a desire to become at least as famous as his grandfather, to make sure that the family heritage will continue, and to run a very profitable, family-driven company.

"The very central person in the total game is Piech," said Dudenhoeffer.

The Piech family owns a company called Porsche Salzburg, a successful wholesaler of VWs in Austria and other eastern European countries. This is another big reason for Piech to be concerned about the long-term health of VW, and to retain the power to make sure the family retains this lucrative link, according to Dudenhoeffer, who also believes Porsche will eventually buy all of VW.

"After the fall of the (VW) law, Porsche will make a takeover bid to all shareholders in VW. This will happen in 2007 or 2008," he said.

Investment banker Dresdner Kleinwort agrees.

"We continue to believe that Porsche intends to make a full bid for VW," Dresdner Kleinwort said in a report.

Audi: the jewel in the crown

Dresdner Kleinwort isn't convinced by recent statements from Porsche that it has no special plans for Audi. Audi also controls Lamborghini, while VW runs Bugatti and Bentley.

"We continue to believe that Porsche envisages a third powerful German premium car: the Porsche-Audi entity. Such an entity would give a turbo boost to the already strong performance of both brands," Dresdner Kleinwort said.

And a report from investment banker Morgan Stanley offers another reason why Porsche covets Audi so much.

Audi, according to Morgan Stanley, is still undervalued.

Audi equals 88% of VW value

"We continue to see further evidence that the evolution of growth and profitability is vastly under-appreciated by the market. Our new fair valuation for Audi AG of €650 per share represents €73 per VW share or 88 percent of the current VW share price," said Morgan Stanley.

Morgan Stanley also raised its estimate for Audi's long term profits to a margin of 7.5 percent from its previous target of 6 percent.

"Our higher margin assumptions are driven by the pace of upcoming volume growth, including the A5 (a coupe expected in mid-2007 based on the new generation 2008 A4), TT Roadster, and R8 in 2007, mix improvement and cost-sharing with Porsche and lower than expected projected capital investment," Morgan Stanley said.

In mid-December Audi announced it will invest around $11.1 billion from 2006 to 2011 as part of its plan to almost double its range to 40 models by 2015. Total investment will reach $15.5 billion through 2011.

The Porsche connection also figures in Morgan Stanley's equations.

"Cooperation with Porsche offers opportunities to defray development costs. Porsche has made no secret that it will use competencies of the VW group to develop an advanced electronic architecture for the Panamera. We believe Audi will play a critical role in the development and testing of the Panamera with cost compensation from Porsche to Audi," said Morgan Stanley.

Not only does Dresdner Kleinwort believe that Porsche lusts after Audi, it really wants to take as much advantage of VW's resources as possible, with perhaps an eventual takeover in mind.

Porsche plans for VW

"Porsche is serious about increasing its influence at VW in order to improve substantially VW's profitability and dividend payout. Taking-over VW or not, we conclude that Porsche will continue to fully leverage VW to its benefit," Dresdner Kleinwort said.

B&D Forecast's Dudenhoeffer doesn't think Porsche should get too close to Audi. "It doesn't make much sense to merge Porsche with Audi. But they will collaborate intensively. I think it makes more sense to run Porsche and Audi independently. Of course they can share components or parts," Dudenhoeffer said.

Ant then there is Volkswagen.

Dudenhoeffer believes Piech's ill-fated foray into the luxury market with the VW Phaeton won't be repeated. The restructuring plan needs to be continued. VW should dump its Spain-based Seat brand -- it also owns Skoda in the Czech Republic.

"So I think in the future there will be two groups at VW -- Audi-Lamborghini-Bentley-Bugatti, and VW-Skoda. Porsche will do best if it remains independent. And Porsche will retain the leverage for the family to run VW from Salzburg," Dudenhoeffer said.

Sabine Blumel, European autos analyst at Italian investment house Banca IMI, while not ruling out the long-term possibility of Porsche buying all of VW, said Porsche could control the company effectively with 29.9 percent and drive on the restructuring plan.

Access to VW's cash flow

"(Porsche CEO Wendelin) Wiedeking envisages enormous upside potential for VW, beyond its current restructuring efforts, through repositioning of its brands and greatly improving production and management efficiencies. However, only a full take-over would give Porsche access to VW's cash flow," said London based Blumel in a report.

Meanwhile these opaque machinations and shenanigans inspired the London Financial Times to pose the question "Is Porsche playing with the Devil at Volkswagen?"

Commenting on rumors that Lower Saxony's premier minister Christian Wulff was trying to organise institutional shareholders to block Porsche's attempts to increase its board representation ahead of a crucial supervisory board meeting in February and the April annual meeting (when Piech's reign as chairman ends), the FT wondered whether this might be fruitless given Piech's trump card - the backing of VW's union representatives on the board.

Dr Faust on the cards

But the trump card might have hidden penalties.

"In so doing, he (Piech) has what some are already calling a "Faustian pact" with Labour. Yet to make its investment work, Porsche will have to secure union backing for much needed restructuring and cost cutting at VW. Will the unions agree? The first signs are hardly encouraging with VW backing down on its plans to close its Brussels plant. Mr Piech should remember how the Devil ultimately insisted on payment in Goethe's Faust," said the FT.

My dictionary defines a Faustian Pact as a deal made for present gain without regard for future consequences. That says it all really; there's no need to trouble ourselves with the gruesome end suffered by Dr Faust.

Neil Winton, European columnist for Autos Insider, is based in Sussex, England. E-mail him at neil.winton@btinternet.com

http://detnews.com/apps/pbcs.dll/article?AID=/20061230/AUTO02/612300304/1148/AUTO01

 

[Ultimate Car Guy]

Re: The "Porsche wants Audi" thread

Audi has got to be one of the hottest propeties on the market at the moment- it's very profitable and it's got a bright future. From the shareholders perspective, a lot of money would be made if it was spun-off from the VW group.

Audi is so undervalued at the moment, a spin-off would be a great way to realise it's true value. This prospect should send all those investment bankers and corporate raiders spinning.

 

[Deutsch]

Re: The "Porsche wants Audi" thread

Audi has got to be one of the hottest propeties on the market at the moment- it's very profitable and it's got a bright future. From the shareholders perspective, a lot of money would be made if it was spun-off from the VW group.

One could only imagine what the Porsche association (name alone) could do for the Audi brand as well, not to mention engineering cooperation - boy would BMW have it bad. However good/or bad an idea this seems to the casual spectator, I'm sure Wiedeking would make the best decision for Porsche's future. He's done a fantastic job as it is.

 

[Ultimate Car Guy]

Re: The "Porsche wants Audi" thread

Imagine how much money in R&D, Purchasing and Manufacturing would be saved. The engineering synergies alone would make any CFO and chief engineer drool.

This scenario would really shake the establishment. But i'm sure BMW would be able to react accordingly. Strong competition always brings the best out of great companies.

 

[Deutsch]

I believe Audi being the newer brand, with it's continuing success, would most likely strong arm the more storied BMW, simply because Audi is "what's new" and "what's hot". In combination with the Porsche tie-in, both brand perception and brand equity would go through the roof (think Mini-BMW, though a little different with Audi having a diverse model portfolio, but look at the brand quality association to get my point).

 

[Mr. M]

If Porsche wants to take over VW just for Audi, well I don't know what to say but it sounds absurd. It is financially sound but what about the rest of the VW Group?

This might mean future collaborations between Audi and Porsche (a good thing for both sides) but as for the rest of the VW group, it might just be tragic. They would be left in limbo without their most valuable asset, Audi, having instead VW as a volume maker and super-luxury brands Bugatti, Lamborghini and Bentley. Now that's a mess.

 

[Deutsch]

If Porsche wants to take over VW just for Audi, well I don't know what to say but it sounds absurd. They phrased it as if Porsche wants to chuck all the other brands out for sale and just have Audi.

This might mean future collaborations between Audi and Porsche (a good thing for both sides) but as for the rest of the VW group, it might just be tragic. They would be left in limbo without their most valuable asset, Audi, having instead VW as a volume maker and super-luxury brands Bugatti, Lamborghini and Bentley. Now that's a mess.

Very true, but all businessmen are guided by "animal spirits", per Adam Smith . There's nothing that can contain the desire and pursuit of perfection, especially true for Ferdinand Piech, an absolute mad man by any business persons standards. In honesty though, I do believe that Porsche is in it for the long run and not short term benefit, remember it's not so much Audi that's already working in close collaboration w/ Porsche, but VW.

 

[Ultimate Car Guy]

True, thats possible. But consider what happend with the creation of the Wolfgang Reitzle's PAG several years ago, and to a lesser extent, BMWs acquisition of Rover. A merger/consolidation may seem beautiful on paper, but it's the execution of the integration that's the hardest to pull-off. As salivating as this Porsche/Audi allance sounds, its rather too premature to say that it'll topple BMW off the top. A lot of hard and intelligentgent work still needs to be done and it may be years before these benefits are realised.

Also consider that BMW will not be standing still whilst this could be going on. The company has treamendous momentum to propel it to future success- it's going to be extremely difficult to stop.

 

[Imhotep Evil]

Re: The "Porsche wants Audi" thread

One could only imagine what the Porsche association (name alone) could do for the Audi brand as well, not to mention engineering cooperation - boy would BMW have it bad. However good/or bad an idea this seems to the casual spectator, I'm sure Wiedeking would make the best decision for Porsche's future. He's done a fantastic job as it is.

How ?!

Porsche RWD rear and mid engined cars vs. Audi FWD front engined-transversal.

Hell Audi make the best sport prototypes in the world, yet they had to borrow from Lamborghini stuff to make the R8.

 

[Ultimate Car Guy]

Re: The "Porsche wants Audi" thread

If a Porsche-Audi-VW were to take place, i guess they could benefit in sharing the platform/modules/components, purchasing and manufacturing with:

1. Future Cayenne/Q7/Toureg
2. Panamera/A7/Passat Coupe

They could also save on Research expenditure.

 

[Deutsch]

Re: The "Porsche wants Audi" thread

How ?!

Porsche RWD rear and mid engined cars vs. Audi FWD front engined-transversal.

Hell Audi make the best sport prototypes in the world, yet they had to borrow from Lamborghini stuff to make the R8.

Wow, I really don't know what to say for someone like you Imhotep, really. I can't even say that you make sense...

You must not be caught with the times if you say that Porsche only builds RWD, rear/mid engined cars, because a lot has changed within the past five years. It's not rocket science to see the possible synergies that could become with engineering expertise shared between both Porsche and Audi. Just because Audi builds front engined, front/all wheel drive cars doesn't mean they wouldn't have anything to benefit from cooperation with an automaker that does the opposite. OK, so Audi owns Lamborghini and they borrowed a chassis they invested in to make their very own sports car??? Please. The R8 is a completely different car than the Gallardo, only sharing it's transmission and driveline. Everything else is different.