Porsche Looks to Qatar for SalvationDietmar Hawranek
June 7 could become a historic day for Germany's Porsche and Piëch families. On that particular Sunday, the two families met in Salzburg, where Porsche CEO Wendelin Wiedeking and Chief Financial Officer Holger Härter presented a plan that could free the sports car manufacturer of its suffocating debts.
The emirate of Qatar wants to invest in Porsche (PSHG_P.DE). The two families only need to agree on a capital increase, which would allow Qatar to acquire ordinary shares for €2 billion ($2.77 billion). So far, the Porsches and Piëchs have always held all the company's common shares themselves—permitting outsiders only to acquire preferred shares without voting rights—a privilege the families have managed to defend through all previous crises the sports car-maker has experienced.
When Ernst Piëch, the grandson of Porsche founder Ferdinand Porsche, wanted to sell his portion of the company to an Arab investor in 1983, other family members pooled together and acquired his shares. Porsche faced bankruptcy in 1992 and Toyota offered to acquire the car-maker for 1.5 billion deutsche marks, but the families declined.
This time, though, they've weakened their stance: According to a source close to them, a clear majority of Porsche and Piëch family members have agreed to Qatar's acquisition of 25 percent of the company's common shares. Even Ferdinand Piëch, who has opposed the deal, can't seem to hold it off any longer. He could've formed a blocking minority with his brother Hans Michel, one the other family members couldn't break. But Hans Michel—who traveled with Wolfgang Porsche to Doha to visit the Emir of Qatar, Sheik Hamad bin Khalifa Al-Thani—appears to be in support of the injection of sovereign wealth funds from Qatar.
With the capital increase, Porsche stands to earn anything from €4 billion to €5 billion—half through the issuing of new preferred shares and half from the Qatar funds. The Stuttgart-based automaker needs the money in order to pay off some of its €9 billion in debt. Wiedeking alerted the families to the urgency of raising funds: "You need to quickly decide now." Recently, SPIEGEL reported that Porsche came close to insolvency during a three day period from March 22 to 24.
For Porsche's boss, the time schedule is already fixed. On June 8, Qatar and its advisors ended their due diligence on the sports car manufacturer. The capital increase could be decided at a special meeting of the Porsche supervisory board in early July. Shareholders could then agree to the deal at a specially convened meeting at the beginning of September. The fresh billions would land in Porsche's bank accounts in November at the latest.
But even if everything runs smoothly, Porsche still has nail-biting months ahead of it before autumn. Debts are just one problem. The company needs a €1.75 billion credit line in order to run its business. When the company received a loan in March for the acquisition of Volkswagen (VOWG.DE) shares, some banks reduced their so-called working credit in return—money Porsche needs in order to pay its vendors, for example. Now Porsche wants to borrow the money from the government-owned development bank KfW.
But political opposition is growing. Politicians with both the center-left Social Democrats (SPD) and the conservative Christian Democrats (CDU) argue that if Porsche needs money, it could sell some of its shares in Volkswagen. Porsche's efforts to acquire Volkswagen are largely responsible for the company's current financial shortfall.
The company does have its champions—such as Günther Oettinger, governor of Porsche's home state of Baden-Württemberg, who is pushing to secure the loans. But even his fellow party members doubt that he can provide enough leverage to actually get help for the company. A CDU member estimated that Oettinger's political weight in Berlin could be "measured with a postal scale."
Without a KfW credit line, things could get very uncomfortable for Porsche. The sale of a small parcel of Volkswagen shares is not an option, Porsche managers argue. It could cause VW's market value to collapse, forcing Porsche to save even more money and possibly settle its accounts with vendors even later.
Porsche's weaknesses could actually be in the interests of the Volkswagen, where CEO Martin Winterkorn has developed an alternative rescue plan for the highly indebted Porsche Automobile Holding.
The holding owns 50.8 percent of Volkswagen and 100 percent of the common shares of the Porsche corporation. Volkswagen could buy the holding's subsidiary Porsche AG for €7 billion to €8 billion. Porsche would then be incorporated as the tenth brand in the VW group. The headquarters would remain in Stuttgart-Zuffenhausen and Porsche would retain its own board of directors, just like VW subsidiary Audi. Porsche Holding could erase nearly all of its debts in the process.
This is the plan favored by Ferdinand Piëch, though his relatives have thrown their support behind the deal with Qatar. It's unlikely he'll be able to sway them, but Piëch is always good for surprises.
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