“War has erupted again between Volkswagen and Porsche”

Volkswagen AG, Europe’s largest automaker, called off talks with Porsche SE about a combination less than two weeks after the sports-car manufacturer’s controlling families agreed to pursue a merger.

“There is currently no atmosphere for constructive talks,” Christine Ritz, a spokeswoman at Volkswagen, said yesterday in a telephone interview. In a statement, Porsche said that while a meeting scheduled for today had been canceled, negotiations will resume. It didn’t give details.

The Porsche and Piech families, which together control half of Porsche, agreed May 6 to create an “integrated” carmaker that would put Porsche alongside VW brands including Skoda and Audi. Within a week, VW Supervisory Board Chairman Ferdinand Piech said that Stuttgart, Germany-based Porsche must first trim its 9 billion euros ($12 billion) in net debt before a merger, and that Chief Executive Officer Wendelin Wiedeking and Chief Financial Officer Holger Haerter were partly responsible.

“War has erupted again between Volkswagen and Porsche,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. Dudenhoeffer was head of marketing strategy and research at Porsche from 1987 to 1990. “Piech is behind that.”

Porsche owns about 51 percent of Wolfsburg, Germany-based Volkswagen, whose automotive division had 10.7 billion euros in net cash as of March 31. The maker of the 911 sports car had been accumulating Volkswagen shares since 2005 to protect ties to its largest supplier.

First Strike

Porsche Supervisory Board Chairman Wolfgang Porsche was struggling to raise financing to boost the stake to 75 percent and had been at loggerheads with Piech about how to unite the carmakers. The May 6 agreement between the families effectively put on hold Porsche’s plan to further bolster its stake in Volkswagen by acquiring VW shares.

The Porsche family is upset over Piech’s remarks and is concerned that they may hurt the value of the carmaker, Der Spiegel said on its Web site. When asked whether Volkswagen would pay 11 billion euros for Porsche AG, the operating unit of Porsche SE, Piech said that amount is “definitely a few billion too high,” according to the magazine.

Porsche workers will hold their first-ever strike today to protest the merger plan, Focus magazine reported. On May 7, a day after the initial pact, Porsche fell the most in at least 13 years on the Frankfurt exchange.

The stock has fallen 21 percent this year, cutting Porsche’s market value to 7.2 billion euros. Volkswagen has declined 12 percent, valuing the carmaker at 69.6 billion euros.

Blocking Minority

“It’s completely open when talks can continue,” VW’s Ritz said. “We are under no time pressure at all.”

Porsche spokesman Albrecht Bamler said the situation may become clearer tomorrow. He declined to elaborate.

The 72-year-old Piech is a grandson of Ferdinand Porsche, who founded the sports-car manufacturer and was Volkswagen’s first leader when the carmaker was set up under Adolf Hitler’s Nazi regime in the 1930s. In addition to leading the supervisory board at Volkswagen, where he was CEO for nine years until becoming chairman in 2002, Piech is a member of Porsche’s board.

Any agreement between Porsche and VW will require approval by Volkswagen’s home state of Lower Saxony, which has a right to veto decisions through its 20 percent stake in VW. The automakers, worker representatives and Lower Saxony officials will decide on the new group’s structure over a four-week period, Porsche SE said May 8.

“Piech wants to form Volkswagen according to his own ideas and he also wants to give Porsche and CEO Wendelin Wiedeking the boot,” Dudenhoeffer said.

Source - Bloomberg