During my morning workout today I watched "Morgenmagazin", a mutual tv programme by ARD and ZDF, Germany's mammoth public tv channels. One topic was German automaker Porsche's announcement to acquire twenty percent of Volkswagen AG.
The reporters of "Morgenmagazin" were jubilant about the transaction. They called it a "win-win" situation for Porsche as well as Volkswagen. A leading conservative politician (Christian Wulff), who was interviewed about the transaction, was equally impressed. He stressed that Porsche was loyal to Germany.
The Porsche folks' own justification for the proposed deal is
...to prevent any hostile takeover of VW that could threaten the partners' business ties.
Concerned that a European court could overturn the so-called "VW law" that helps shelter Europe's biggest carmaker from unfriendly advances, Porsche said it needed to boost its current stake of under 5 percent to protect the German car partnership.
"Our planned investment is the strategic answer to this risk," Chief Executive Wendelin Wiedeking said in a statement.
Porsche builds its Cayenne offroader with Volkswagen and also is developing fuel-saving hybrid technology with VW, which supplies content for 30 percent of Porsche's sales volume.
Porsche said in a statement it would fund the purchase of the stake -- worth around 3.3 billion euros ($4.01 billion) at current prices -- from available liquidity. A spokesman added it might increase its stake by buying VW shares on the market.
"The stake will in no case reach the level at which Porsche would have to make a public offer to take over VW," it said.
Volkswagen welcomed the move. A spokesman quoted Chief Executive Bernd Pischetsrieder as saying a stable shareholder structure was important for its long-term business prospects and would strengthen VW's working relationship with Porsche.
At the time of this posting - 1 pm Berlin time on Sept. 26 - the Porsche stock was down 9 percent, while VW's shares oscillate around last weeks closing level (against a 2.4 percent gain of the DAX, Germany's stock index). Porsche shareholders pay through their nose for this "strategic answer" to shelter VW from "unfriendly advances", meaning foreign investors trying to impose on VW anglo-saxon standards of running a business efficiently. Rather than letting shareholders participate in Porsche's large cash holdings, Porsche's management decided to tie the company to the fortunes of a German manufacturer of small and mid-sized cars with considerable sales and profit problems.
(BTW - the cooperation of Volkswagen and Porsche dates back to the days of Adolf Hitler. The Porsche family - represented by former Volkswagen CEO Ferdinand Piech, an engineer with great technical knowledge, but lacking in marketing skills - still owns a considerable share of the Porsche and the VW stock.)
Porsche's decision to increase the VW stake most likely is not a wise move from a strictly business perspective. In Germany's anti-anglo-saxon political climate the decision will be hailed by the left, however, as necessary for the good of the Vaterland.
If you are searching for the root causes of Germany's miserable job performance, the Porsche/VW deal may well serve as a typical example of "Capitalism the German Way", that eventually leads to a further deterioration of Germany's economic power.
Porsche's Cayenne - a symbol of capitalism the German way...