Thursday 26th November 2009

Porsche: VW Takeover Attempt Cost £3.9bn

Porsche licks its financial wounds as VW is poised to finally take control

---

Porsche yesterday revealed the financial pain of its failed attempt to take over Volkswagen, after it posted a £3.9bn loss.

The audacious attempt to consume Volkswagen (which is 82 times larger than Porsche in terms of car sales) has not only resulted in the precise opposite, it has also made Porsche look more like a hedge fund than a manufacturer of sports cars.

But despite the fact that Porsche SE - the company created for the VW takeover - lost £3.9bn after posting a profit of £7.7bn for the previous financial year, Porsche AG, the sports car side of the business, remains in reasonable health.

Yesterday's figures show that Porsche AG made a decent 10.3 per cent operating profit margin on its car sales, against a figure of 2.4 per cent for VW.

Porsche's sales figures have suffered badly in the past year, however. Year-on-year sales were down 24 per cent overall, with 911 sales down 14 per cent, Cayenne sales down a quarter, and Cayman/Boxster sales down a whopping 40 per cent.

It also seems as though the Porsche-VW ownership saga could finally be drawing to an official close. The two companies reached a deal last week to sell just under 50 per cent of Porsche's sports car business to VW by the end of the year, while the sports car maker will be entirely subsumed into the VW empire by 2011.

In the short term, a VW shareholders' meeting next week could agree on special rights for Lower Saxony - the state that owns 20 per cent of VW. If plans to grant the state the right to appoint two members of VW's supervisory board go ahead, Porsche's control over VW would be legally over.

[Escort Si-130]

Porsche tried to bite more than it can chew

[MrTappets]

If Porsche SE went from +£7.7 billion to -£3.9 billion, doesn't that mean the cost of trying to take over VW was more like £10 billion? Or have I made a daft error somewhere?

[Ordinary_Chap]

MrTappets said:

If Porsche SE went from +£7.7 billion to -£3.9 billion, doesn't that mean the cost of trying to take over VW was more like £10 billion? Or have I made a daft error somewhere?

Yeah thats probably what they lost in their bid to buy enough shares/assets rather than the overall worth of VW.

[UltimaCH]

This saga becomes more and more complicated to understand, except if you are a financial guru. Talking in billions seems so normal these days but they do represent amounts that the majority of the world's population will never earn in a lifetime.

[jstok]

Sell them to Smolensky!!!!

[havoc]

Ordinary_Chap said:

MrTappets said:

If Porsche SE went from +£7.7 billion to -£3.9 billion, doesn't that mean the cost of trying to take over VW was more like £10 billion? Or have I made a daft error somewhere?

Yeah thats probably what they lost in their bid to buy enough shares/assets rather than the overall worth of VW.

No. LAST YEAR was a profit of 7.7. This year was a loss of 3.9. Excluding exchange-effects, they've still created value of 3.8m...which makes you wonder why Wiedeking was fired!?!

[zakelwe]

havoc said:

Ordinary_Chap said:

MrTappets said:

If Porsche SE went from +£7.7 billion to -£3.9 billion, doesn't that mean the cost of trying to take over VW was more like £10 billion? Or have I made a daft error somewhere?

Yeah thats probably what they lost in their bid to buy enough shares/assets rather than the overall worth of VW.

No. LAST YEAR was a profit of 7.7. This year was a loss of 3.9. Excluding exchange-effects, they've still created value of 3.8m...which makes you wonder why Wiedeking was fired!?!

Re-read it, they lost billions, not made it.

Andy

[havoc]

zakelwe said:

havoc said:

Ordinary_Chap said:

MrTappets said:

If Porsche SE went from +£7.7 billion to -£3.9 billion, doesn't that mean the cost of trying to take over VW was more like £10 billion? Or have I made a daft error somewhere?

Yeah thats probably what they lost in their bid to buy enough shares/assets rather than the overall worth of VW.

No. LAST YEAR was a profit of £7.7bn. This year was a loss of £3.9bn. Excluding exchange-effects, they've still created value of £3.8bn...which makes you wonder why Wiedeking was fired!?!

Re-read it, they lost billions, not made it.

Andy

Erm, Andy...

article said:

But despite the fact that Porsche SE - the company created for the VW takeover - lost £3.9bn after posting a profit of £7.7bn for the previous financial year, Porsche AG, the sports car side of the business, remains in reasonable health.

THAT reads EXACTLY as I explained it...ignoring the "m" mistake. That company, across two years, has made nearly £4bn (£7.7bn profit last year less £3.8bn loss THIS year). That's pretty-simple maths there chap!

[Johnpidge]

Cayenne sales down 25%, Cayman/Boxster down 40% - wow bit of a reversal of fortunes!!!!!!!!

[alfabadass]

They made 7.7 billion last year and lost 3.9 billion this year.

That leaves then with 3.8 billion over two years which isn't bad in real physical terms. Although theoretically they lost the 7.7 billion they didn't make this year plus the loss of 3.9 billion.

But that sort of thinking is what got us in this mess IMO.

[Ordinary_Chap]

havoc said:

zakelwe said:

havoc said:

Ordinary_Chap said:

MrTappets said:

If Porsche SE went from +£7.7 billion to -£3.9 billion, doesn't that mean the cost of trying to take over VW was more like £10 billion? Or have I made a daft error somewhere?

Yeah thats probably what they lost in their bid to buy enough shares/assets rather than the overall worth of VW.

No. LAST YEAR was a profit of £7.7bn. This year was a loss of £3.9bn. Excluding exchange-effects, they've still created value of £3.8bn...which makes you wonder why Wiedeking was fired!?!

Re-read it, they lost billions, not made it.

Andy

Erm, Andy...

article said:

But despite the fact that Porsche SE - the company created for the VW takeover - lost £3.9bn after posting a profit of £7.7bn for the previous financial year, Porsche AG, the sports car side of the business, remains in reasonable health.

THAT reads EXACTLY as I explained it...ignoring the "m" mistake. That company, across two years, has made nearly £4bn (£7.7bn profit last year less £3.8bn loss THIS year). That's pretty-simple maths there chap!

Porsche made money one year and lost the next year. On top of that their failed take over weakened Porsche financially to the extent VW were easily able to perform a reverse take-over.

Even though they have made a profilt over the two years, the take-over attempt was a disaster for Porsche and has meant they have lost conservatively about 7bn they would have made had they not tried to take over VW.

The management have to expect to go if they take a huge risk and fail, thats what happened here.

Thats how I read it anyway.

[barks]

Did they loose money so to speak, or did they just spend it on VW shares? In which case surely they still have the shares which are worth whatever they are worth now.

[Dr_Rick]

My interpretation would be that over the two years in question they made slightly less money than they would have done if they'd made a profit on both years.

Imagine a staircase, day one you go up (gain) 10 flights of stairs, day to you go down (lose) 4 flights of stairs. The end product is that they're still 'up' 6 flights of stairs.

Dr Rick

[RichardR]

Johnpidge said:

Cayenne sales down 25%, Cayman/Boxster down 40% - wow bit of a reversal of fortunes!!!!!!!!

Most likely down to Cayenne diesel sales offsetting the drop in sales of existing Cayenne models.

[Lil' Joe]

The My mind boggles at this takeover stuff....

[Stratman1]

RichardR said:

Johnpidge said:

Cayenne sales down 25%, Cayman/Boxster down 40% - wow bit of a reversal of fortunes!!!!!!!!

Most likely down to Cayenne diesel sales offsetting the drop in sales of existing Cayenne models.

Most likely down to the fact that they are pig-ugly and someone finally noticed. (apologies to Boxster/Cayman drivers and driving dynamics excepted!)

[Stratman1]

Porsche got over-confident and forgot they are a carmaker, not a derivatives house. Too many clever fananciers and a big trading book - and they were bloody good at it for a few years, manking alot more from that than from cars.

[havoc]

Ordinary_Chap said:

The management have to expect to go if they take a huge risk and fail, thats what happened here.

Thats how I read it anyway.

Maybe...but there's a lot of local politics surrounding VW, and (AIUI) Porsche were counting on Lower Saxony complying with the German Court's ruling. LS didn't, changed the rules again, and Porsche got stung.

So I (for once) have some sympathy with Porsche in this one - the plan was (legally and financially) sound, but politically came unstuck...and IMHO politicians are ALWAYS at the top of any blame-tree!

[poison]

does not matter how you work the figures major cock up by all concerned mirors the stupid antics in banks and other boardrooms across the world when playing with other peoples money,just heard on the news big crapp coming out of dubai hope i spelt that right

[k-ink]

I expect the build quality of porsches will be dragged right down to VW's levels, whilst more of the profit is spent on marketing nonsense