Porsche facing bankruptcy?

26 May 2009

JOHANNESBURG (Wheels24.co.za) - Porsche’s cavalier attempt to obtain a majority stake in VW has left the company so heavily in debt it may be on the brink of bankruptcy.

The celebrated German sports car manufacturer acquired a 51% share in VW earlier this year in a raft of derivate deals which tripled Porsche’s debt position to €9bn.

VW was not exactly privy to a takeover and the deal has gone badly wrong, forcing Porsche to settled for a merger instead.

Currently the fabled performance car maker is deflecting all talks of bankruptcy, despite admitting yesterday it had borrowed some €700m from VW to meet its operational and debt servicing requirements after nearly being forced to the brink in March.

Porsche admitted the company finds itself in a state of affairs which necessitates urgent funding. "We are still lacking €1.75bn. We are negotiating with several banks, including the KfW (state development bank)," said a spokesman.

Representatives from Porsche are understood to also be in talks with the Bank of Tokyo for a €750m loan, and are seeking help from the regional government of Baden-Wurttemberg.

The case for government intervention is exceedingly tenuous though, as Porsche’s undoing has been wholly self inflicted and not as result of industrial action or falling sales.

With an election in September, the German government’s primary concern is surely the future of Opel and its voting workforce, not providing a soft landing for Porsche's financial misadventures.

Porsche’s announcement of the €700m VW loan shaved 3.1% off the Zuffenhausen based company’s share price.

Porsche founder Ferdinand Porsche shows a model of the Porsche 356 No. 1 to his grandchildren Ferdinand Piëch (right) and Ferdinand Alexander Porsche in 1949. Piëch was CEO of Volkswagen AG until 2002 and is currently chairman.

Is it the boss or the chairman's fault?

Despite Porsche CEO - and allegedly Europe's best paid executive - Wendelin Wiedeking’s prolificacy in managing the company’s design and engineering to become the world’s most profitable auto maker per car sold, it seems a long brewing family feud has nearly proved Porsche's undoing.

Legendary engineer, former VW boss, Ferdinand Piech (currently Wolfsburg’s chairman), has frustrated his cousin, and Zuffenhausen chairman, Wolfgang Porsche’s ambition for a takeover.

Piech is allegedly concerned about VW employees job security in the wake of a Porsche (company) take over, whilst Porsche (Wolfgang) is seemingly intent on realising his family's long-standing ambition of finally gobbling up VW.

In the meanwhile, Porsche has nearly been left floundering.