Porsche said it had asked the German government for a loan, raising fresh questions on Wednesday over its ability to manage a debt mountain that has already forced it to abandon a takeover of Volkswagen.
Porsche racked up about 9 billion euros of net debt trying to swallow its much bigger rival Volkswagen before the financial crisis turned the tables on the would-be predator.
Now that its gamble to take over VW has backfired, Porsche is fighting for influence in a union with the world’s No.3 car company and its stable of brands spanning Bugatti and Lamborghini to the Volkswagen Golf.
The German sportscar maker said it had asked for a 1.75 billion euro ($2.5 billion) loan but that it would not seek guarantees that would make it easier to borrow.
Porsche sought to distance itself from a German industry rescue fund set up for helping companies in trouble, saying: “We don’t want to take money at the expense of the taxpayer.”
But the state banking group running the fund — KfW — said any such loan would be paid from the roughly 100 billion euro state scheme to stimulate flagging German industry.
A raft of German companies have sought aid from the government as the global economic crisis slashes demand for the country’s exported goods.
Normally it takes less than two weeks for the government to decide on granting emergency loans. But Porsche’s request is the biggest yet and is likely to take longer, said one source close to the matter.
In March, Porsche tried to drum up 12.5 billion euros in loans to refinance its debt, but only managed to get 10 billion. It has lined up another 750 million in bank loans since then, leaving it on the lookout for another 1.75 billion.
SKIDS OFF COURSE
It is the latest development in a saga which has seen the dream of Porsche boss Wendelin Wiedeking turn into a nightmare, which one analyst warned was sending the carmaker “sliding toward disaster.”
Wiedeking had wanted to secure access to Volkswagen’s technical know-how and the car parts that it uses, for example, from the VW off-road Touareg, to make its Cayenne.
He used share options to creep toward majority control in Volkswagen, making billions of euros in paper gains as Volkswagen’s stock price spiked.
However, the move lumbered the Stuttgart-based group with heavy debts which became difficult to handle when credit markets froze.
Wiedeking also had bet that the European Commission would overturn a German law that gives the regional government a veto on decisions at VW, which would include letting Porsche take management control.
But that has not happened and has put the more than 10 billion euros in cash at VW’s automotive business — money Porsche had hoped to use to repay its debts — out of its reach.
Porsche SE amassed debt while building a 51 percent voting stake in Europe’s largest carmaker. Porsche’s accounts show that cash flows at its healthy sports car business are sufficient to make interest payments but not pay off the principal.
Shares in Porsche closed down 0.9 percent while Volkswagen ordinary stock fell 6 percent to 238.06 euros, reversing some of this week’s sharp gains.