Merger talks between Porsche and VW collapse

“There is currently no atmosphere for constructive talks,” said Christine Ritz, a spokeswoman at Volkswagen while confirming that the merger talks have been suspended.

The Porsche and Piech families had agreed to form an “integrated” carmaker that would have both Porsche and VW brands. In all, there would have been 10 brands, including Skoda and Audi in the repertoire of the combined entity.

The debt factor
Before the nitty-gritty of the merger could be thrashed out, VW Supervisory Board Chairman Ferdinand Piech announced that VW wouldn’t help “solve” Porsche’s pecuniary troubles and that Porsche must lower its 9 billion Euros ($12 billion) in net debt.

This debt was acquired by Porsche to increase its stake in VW to 75 percent and has been a moot point between the two automakers ever since. VW and Porsche own stakes in each other though an intricate family history. As on date, Porsche owns about 51 percent of Wolfsburg, Germany-based Volkswagen.

While the Porsche family is upset over Piech’s remarks, Volkswagen CEO Martin Winterkorn has made his company’s stand clear, “We must get a clear idea of the true state of affairs at Porsche. It’s in the interest of all concerned to ensure that there’s no threat to Volkswagen’s financial stability.”

Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen rebuffed Piech, the 72-year-old grandson of Ferdinand Porsche. He said, “Piech wants to form Volkswagen according to his own ideas and he also wants to give Porsche and CEO Wendelin Wiedeking the boot.”

Strike at Porsche
Before the talks were officially called off, about 6,000 employees went on strike at Porsche’s main Zuffenhausen plant and two other factories near Stuttgart. Uwe Hueck, Porsche’s top labor leader, while addressing a joint rally, said, “Porsche will remain independent; Porsche has to remain Porsche.”