Gavin Green: Porsche is the loser in this sale

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But in so many ways, it is still a very German business. At the news that the company may be the subject of hefty foreign investment and a possible takeover, Porsche announced a 20 per cent stake. Managers, keen to save their own necks, celebrated. Most shareholders and analysts rebelled. It was, one analyst said, "an unwelcome return to the Deutschland AG way" - that clubby network of cross-shareholders that has insulated Germany from international capitalism and repressed growth.

The key player in the new tie-up is the chairman of Volkswagen's supervisory board and Porsche family scion Ferdinand Piech. He once claimed that shareholders were of little interest to him, and this mantra was recently repeated by Porsche boss Wendelin Wiedeking, who said, "We put customers first, then workers, then business partners, suppliers and dealers, and then shareholders." In a business dominated by capital, Wiedeking's philosophy may be refreshing. Whether it is practical, or sensible, is another thing.

When Bernd Pischetsrieder replaced Piech as chief executive of Volkswagen in 2002, he vowed that his priority was to improve profitability and boost shareholder value. Pischetsrieder wanted to transform Volkswagen into a 21st-century business - difficult when it is partly government owned and half the supervisory board represent the workforce or trade unions.

But it is Porschethat has suffered most from the recent acquisition. The company says it bought the stake, thus becoming Volkswagen's biggest shareholder, to head off a hostile VW takeover and protect long-term ties to an important parts supplier. But is it wise for the world's most successful small-car maker, that prides itself on its quick decision making, to take a major stake in an ailing automotive giant? Doesn't Porsche have a better way of spending over $3bn - in a business that is notoriously cost-intensive and dependent on the launch of expensive new models? Does it have the spare management capacity to worry about Volkswagen?

Shareholders think it a poor move; Porsche shares plunged more than 10 per cent on news of the stake.

The precedents for a small company buying into a mass-market rival are not encouraging. Daimler-Benz's takeover of Chrysler has been disastrous, and is partly blamed for the subsequent dip in Mercedes' quality.

BMW bought Rover, a one-time mass maker, and despite spending billions on new product and management, lost a fortune. Rover eventually went out of business. The man who engineered that takeover is the same Bernd Pischetsrieder who has just welcomed Porsche as his major shareholder.

motoring@independent.co.uk

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