Porsche to Start a New Auto Empire

by : Anthony Fontanelle



Europe will see the rise of a new automobile empire. The much-anticipated conglomeration will be composed of Porsche, Volkswagen, and Scania.

Porsche Automobil Holding SE was given the green light by its board Monday to acquire majority stake in Volkswagen AG which owns Audi, Skoda, Seat, Lamborghini, Bentley and Bugatti brands. VW, meanwhile, said it will take a controlling interest in Scania, a Swedish truckmaker. This also means Porsche is in a position to absorb Scania with MAN AG, a German truckmaker which Volkswagen holds 29.9 percent, reported the Associated Press.

VW Chief Executive Martin Winterkorn said Volkswagen will focus on synergies with Scania AB, mainly in purchasing raw materials such as steel as well as research and development and electronic components.

Analysts in the industry said the deals are aimed at accumulating more wealth. The deals also strengthen the control held by the grandson of Porsche founder - Ferdinand Piech. He is the chairman of Volkswagen and MAN supervisory boards.

The maker of has been gradually increasing its stake in Volkswagen for more than a year and won a significant victory in 2007 when the European Union's highest court promulgated a decision that the German government had to remove a cap on voting rights at VW.

"Volkswagen has announced that they're taking a majority share of Scania. Next they could upgrade their stake in MAN to a majority stake, merge the two companies into a Volkswagen Commercial AG and sell that to Porsche SE. Then they could hand back to Porsche ... or to their stock owners, a special dividend from the revenues of that sale," said Christoph Stuermer, an auto analyst with Global Insight.

In a statement, Porsche said the reviews by the regulatory authorities are expected to take several months. And when requisite clearances are finally acquired, Porsche can take majority stakes in Volkswagen. The statement added that Porsche does not intend to merge the two companies.

"Our aim is to create one of the strongest and most innovative automobile alliances in the world, which is able to measure up to the increased international competition," said Porsche Chief Executive Wendelin Wiedeking.

Were a tie-up happen, VW and Scania would effortlessly upstage giant rivals such as Volvo AB and Daimler AG, Europe's largest truckmaker.

"It shows the trust that the people in Porsche AG have in Volkswagen," Winterkorn noted at the Geneva Motor Show. "It means a lot of interesting things in the future."