Change of plans for VW and Porsche merger image

More than two years have passed since Volkswagen Group announced plans to merge with premium sportscar maker Porsche SE.

Triggered by Porsche’s attempt to acquire Volkswagen (which ended up with Porsche owing $10 billion to the banks), the merger tactic is likely to turn into something more simple. According to reports from Germany, VW Group plans to acquire the 50.1 percent of Porsche’s carmaking operations it does not yet own. The financial effort for this would be of around $5.28 billion, a “great bargain” as one analyst quoted by Bloomberg said.

The merger tactic is being scrapped because of legal issues and taxes, with the takeover tactic being simpler and faster. Porsche holds a majority of VW common stock and VW, in turn, owns 49.9 percent of Porsche’s automaking business. Martin Winterkorn, the CEO of both companies, wants to integrate the Porsche business into the VW Group to help the company overtake GM and Toyota as the world’s largest carmaker.

Porsche reported an operating profit equivalent to 19 percent of sales in the first three quarters of 2011, while VW reported a 7.7 percent profit margin. For the Volkswagen Group, Porsche’s takeover would boost profitability, as the company could save $950 million by completely integrating the sportscar brand into the group.