Porsche Rides VW to the Most Valuable Company in the World!

When I first saw this story a few weeks ago on CNBC, I couldn’t believe what was happening. Course not being a financial guru, I don’t know that I really even understood what was happening.

Last month, Porsche AG announced it had acquired almost 43% of Volkswagen. If that’s not news enough, it also had an option to buy 32% more. Essentially Porsche cornered a 75% position in VW, a company with 60 times the annual production (number of vehicles) of Porsche.

At one point, VW shares went up 4x with a peak of just over 1,000 euros making it the most valuable company in the world. Crazy, even if was a brief stay on top of the world!

Klaus Berning, head of Porsche sales and marketing as well as a member of Porsche’s board, had some interesting remarks in his speech at the L.A. Auto Show on Wednesday mentioned in an article in the L.A. Times. Here’s a snipit from the Times article…

But the highlight of his speech was the revelation that, incredibly, Porsche’s acquisition of VW isn’t about the money. Apparently it’s about saving Porsche. “Our VW strategy is part of protecting Porsche,” said Berning. “It is our guarantee that Porsche will remain Porsche.”

The startling remark — that without Goliath, David was imperiled — largely fell on deaf ears because the audience was more concerned with the new double-clutch gearbox on display than, well, a multibillion-dollar acquisition that shook the financial world, or the fact that one of the company’s execs suggested that hugely profitable Porsche was somehow in trouble.

Approached afterward, Berning elaborated. Apparently, Porsche is not on the verge of bankruptcy. Instead, the acquisition would allow the smaller automaker to rely on VW’s considerable engineering capacity to help it develop a new hybrid drivetrain for its Cayenne SUV, as well as on other technological advances in development. “A company of our size needs a technological partner,” he said. “To secure our projects, we had to make sure [VW] would not go to some sort of investment fund.

“That we made money out of the hedges is a nice thing,” Berning continued, “but the main objective was to get the technology.” (Read More)

So Porsche buys a stake in Volkswagen AG, one of the world’s top producers of vehicles just so it has technology partner in it’s back pocket? Pretty gutsy move that ended up paying off. Both figuratively and literally.  A far cry from the little company in the 80’s that may or may not be around for another year.


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