Porsche-VW Merger Turns Ugly

It's now starting to look as if Volkswagen doesn't just want to engineer a dramatic reverse takeover of Porsche (which earlier this year tried to take over VW) but possibly punish Porsche as a brand.

Anyone who’s been following the gyrations of this deal—and I hesitate to call it this, as it’s really become more of a financial farce—knows that Porsche assumed an onerous debt burden in an effort to continue acquiring chunks of VW. By May, that burden had screwed the little-guy-grabs-the-big-guy gambit, at which point VW went on the offensive and has since been trying to gobble up Porsche. At the moment, only the sovereign wealth fund of Qatar seems able to rescue the greatest car company in the world.

Over the weekend, Porsche refused a VW offer to buy almost half of Porsche, arguing that the sudden arrival of billions in cash would trigger crushing payments of debt that Porsche can ill afford. Volkswagen and its chairman, Ferdinand Piech, are bent on smashing the lingering ambitions of Porsche CEO Wendelin Wiedeking, who orchestrated the failed takeover of VW.

Porsche still has some fight in it, but the situation is getting grim for Wiedeking, whose Qatar Hail Mary is his only out. Obviously, this whole saga has descended into a war of large personalities astride the clannish German carmaking scene. Unfortunately, as this AFP report points out, quoting an observer of the merger:

At the very least it appears that developments over the weekend suggest that relations and communication between the respective management teams of VW and Porsche have hit an all-time low … What was already a difficult negotiation is rapidly descending into farce and serious harm is being done to the reputations of Porsche and VW as a result.

Well, more damage to Porsche than to VW. Porsche had more to lose and more to gain by taking over VW. Now the “lose” part has kicked into high gear. Wiedeking’s hubristic gamble hasn’t paid off, and it may cost Porsche its distinctive and highly profitable niche in the auto industry. It’s not that we’ll have a world without Porsche—VW is damaging the brand, but it doesn’t want to crush it—but Porsche’s swagger will be hobbled by what it’s had to endure.