The VW that ate Porsche

The fascinating saga concerning the relationship between Porsche and Volkswagen continues with Volkswagen AG's announcement this week that it has acquired a 49.9 per cent share of Porsche AG.

The A$6.3 billion acquisition is described as the "next important step on the way towards the integrated automotive group with Porsche" and is a milestone on the way to acquisition of the trading business of Porsche Automotive Holding Salzburg by 2011. This will be followed by a merger between Volkswagen AG and Porsche SE during the same year.

A very satisfied VW will then control the future destiny of Porsche, as well as enjoy entree into the premium car market along with the subsequent high returns on sales. Porsche currently enjoys the position of being "the world's most profitable automobile manufacturer."

Will Porsche under VW control eventually become a diluted version of what it is today?

Although VW says the merger will allow Porsche, as an independent brand under the roof of the Volkswagen Group, "potential for significant additional growth," some indicators of what could be in store could be read from VW's press statement announcing the 49.9 per cent acquisition.

"The planned integration of Porsche in the Volkswagen Group and the associated closer cooperation will realise significant synergies on both the income and the cost side."

Presumably these synergies will mean some cross-pollination between VW and Porsche products. Maybe good for VW, but questionable for Porsche.

Volkswagen is expecting the merger will result in long-term annual operating profits increasing by around A$1.1 billion.

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