[ritzy]

Originally Posted by Sutripta

Hi,
Correct me if I'm wrong, but I thought the Porche takeover of VW was a very friendly (read crony) deal worked out to keep it all in the family. Which got unstuck when Porche ran into financial difficulties, and VW bailed them out by taking over Porche. (Family looks after each other!)

Regards
Sutripta

Porche's attempt to takeover VW wasn't friendly. The actual plan had many objectives. Some of them varied from firstly disintegrating VW group and selling selectively some brands ( namely Audi at a premium) to actually benifiting Porches themselves to meet growing carbon footprint regulation. You can read all this at many places.

Further, VW's then buying-off of Porche was out of compulsion. Had some sovereign fund taken over Porche at that crumbling stage, it could have got easy access to VW itself. It was a very likely possibility as Porche then possessed sizable amount of VW stocks.

[Sutripta]

^^^
Guys, thanks for the clarification. Did not know that the Porsche bid for VW was hostile.

Regards
Sutripta

[souravc]

Originally Posted by shortbread

@ Sutripta,

On paper thats what it looks like but the real story is quite different. I really like these stories of corporate battles

There are two families here Porsche and Peich, who together own one half of Porsche. Now the battle has two sides, it was Ferdinand Peich vs Wolfgang Porsche/Wendelin Wiedeking. Wiedking is the genius who turned Porsche around and made it one of the most profitable car companies by start of the new millennium. It was his teams master-plan to buy a majority in VW by using Porsche's cash reserves and other loans, and once the takeover is complete use VW's cash reserves to pay of the loans. Brilliant isn't it!!

This meant that the Porsche/VW combo will be under the rule of 'Wolfgang Porsche/Wendelin Wiedeking's team. This will not work for Peich and he started to influence parties who had voting rights in VW. Once Porsche started buying slowly into VW the world woke up and the German companies shares shot through the roof, this also meant Porsche's balance sheets showed huge profits albeit built up on debt.

When it came to paying of these debts, Peich stayed out of the voting and also influenced other parties especially the state of Lower Saxony (who has veto rights as per some ancient VW law). All this debt and an ensuing economic crisis (funding/loan difficulties) meant Porsche bit more than it could swallow.

A deal was struck under Peich wherein VW will save Porsche and both families will end up with literally 50% of this VW/Porsche combo. He also ensured that Wendelin Wiedeking was out (after a payout of approx INR 300+ crores) of the company and his way.

Thats a completely wrong representation of facts please ! Porsche used an obscure derivative structure to push hedge funds and investors into a short squeeze on VW stock. Briefly the market cap of the company shot into being the world's most valuable company in the world topping Exxon - this happened in 2008. Porsche and VW: Squeezy money | The Economist - thats the article for you.
Porsche initially had the upper hand in the control posturing as it was the more profitable as compared to VW . With the financial crisis in full swing as demand for luxury cars were slammed , the tables were turned and VW had to rescue Porsche alongwith came the option to hold a controlling stake.

VW is a grown-up enough company to know that a hostile takeover does not work with Japanese companies and certainly not in Japan . Those banking on open offer in India can keep on day dreaming

[souravc]

Originally Posted by Sutripta

^^^
Guys, thanks for the clarification. Did not know that the Porsche bid for VW was hostile.

Regards
Sutripta

Porsche deal with VW paves way for German auto industry giant - Times Online

It was not a hostile bid - later VW rescued Porsche though

[shortbread]

@ SouravC

I agree with the fact that the Financial Crisis threw a spanner in Porsche's plan, but where they struggled more was to finance debt rather than falling sales. The fact is before VW took over, Porsche in turn already had effectively bought 75% of VW.

Even during rosier periods Porsche did not have the cash float to buy a majority of VW. It was Holger Harter's (then Porsche CFO) plan to own 75% of VW and then use VW's own 11 billion Euro capital reserves to pay back its debt. Peich ensured this did not work by influencing the workers council and more importantly the state of Lower Saxony who have veto powers over VW decisions.

This effectively meant Porsche ended up with a debt of $12.5 billion. Sales or no sales Porsche did not have the shoulders to carry this and lack of funding in the dull economic climate meant Porsche ended up more than it can chew.

[AdityaLN]

@shortbread
I agree with you. It was financing the debt rather than falling sales which made the deal fail. Also the huge inflated egos.
We maintain analyst/broker forecasts of companies. This was one big mess which we are still cleaning. It was huge profit one day to a bigger loss a few months later. The debt forecasts were even worse.

Peich comes across as a control freak who has a problem letting go (of VW). However, he is very good in political manoeuvring and doing deals. VW's takeover of MAN and Scania is one example.

Hostile takeover of Suzuki is completely a different ball game. Yes, VW is the biggest shareholder (19.9%), the next biggest one has about 3.5%. Suzuki has a very diverse shareholding. Business deals in Japan are mostly friendly and with the approval of the management (every one is taken care). It's a closed club, an outsider is always frowned upon and not welcome.
If push comes to shove Suzuki will go to it's other big shareholders (Japanese banks and insurance companies) and make some sort of deal not to sell or asking them to close ranks. Or thy might get a White Knight, companies which comes to mind are Nissan-Renault combine or Mazda (both have OEM agreements with Suzuki). VW will have a touch time conversing Japan to sell.

Personally, I think any of this will not happen. VW is just upping the ante to bring Suzuki back to talks.

[MotoKris]

So, now the VW folks are trying all odd tricks... hasn't half the world stood up and said that the deal between Suzuki & VW won't work out when they entered into it???

[moralfibre]

I have a gut feeling that Sergio is going to rescue Osamu Suzuki. Link.

It would be very helpful for both Suzuki and Fiat for their India operations.

[srishiva]

Why does one need to rescue Suzuki? I think there isn't anything that VW can do. Suzuki can at the most make Fiat their diesel engine supplier for years. Suzuki cant get involved more than that. They cant expect to get anything other than engines.

[mayankjha1806]

Today ET talks about this topic and it ends by saying that it's unlikely for VW to do hostile takeover of Suzuki. The VW + Suzuki alliance was billed as partnership of equals when it was performed in 2009. The paper says.

It ends by saying - VW put a brave face saying it would go alone in the subcontinent (Asia/India).

[Aroy]

Actually the original 20% shares were held by GM, who sold them to VW. In a way Suzuki had no say in the transfer.

Most of the Japaneses manufacturing entities are owned by the Japanese business houses, with a lot of cross holdings. So it is not easily to pin point who owns Suzuki Motors. The majority of shareholders may not even be interested in selling.

The reason is that the interest rates are very low in Japan, and a sale has to be followed by a buy, else you have nothing to do with your money. Ownersip of industry in Japan, is about prestige and national pride first and returns later.

[fuel_addict]

Its evident that VW stands to gain the most out of this take-over even if it goes through. I hope it doesn't. The customer stands to gain nothing much out of this. I hope that Suzuki stands its ground and retains its presence in India.

It was interesting to hear Suzuki's response to questions thrown at them about the VW-Suzuki alliance during the Swift launch. The lack of interest in associating with VW was quite clear then as it is now.

[HKap]

Here's what I think can happen

1) If VW do takeover suzuki --> Maruti still holds a share in the MSIL partnership so it won't be that easy for VW to bulldoze Indian customers with their pathetic A.S.S. I trust the government to step in if it starts going down the drain.

2) If VW takeover the entire MUL share as well then i trust common sense to prevail and VW to let suzuki operate as an independent arm of the company. Yes, some "culture" will flow in but it will be gradual. Nothing to worry about in the immediate future.

[.sushilkumar]

Originally Posted by HKap

Here's what I think can happen

1) If VW do takeover suzuki --> Maruti still holds a share in the MSIL partnership so it won't be that easy for VW to bulldoze Indian customers with their pathetic A.S.S. I trust the government to step in if it starts going down the drain.

2) If VW takeover the entire MUL share as well then i trust common sense to prevail and VW to let suzuki operate as an independent arm of the company. Yes, some "culture" will flow in but it will be gradual. Nothing to worry about in the immediate future.

I wish VW takes over MSIL one day( strictly personnel opinion ) As for your point no 1 mentioned above goes , I don;t think Our spineless ,corrupt govt will take any steps to intervene. moreover they are minority stake holder and cannot show a candle to VW leave alone, affecting their decision making in anyway .

for point no 2 - it willbe interesting to know How VW 's other subsidiaries like Skoda / Porsche are operating.

[Sutripta]

Hi,
So what is the truth about why this plan (Porsche taking over VW) was hatched, and by whom?

Regards
Sutripta