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Volkswagen Drives Cash to Porsche's Coffers

Ferdinand Piech has a stake in Porsche Holding. Source: DPA
Time to say goodbye. Ferdinand Piëch, seated, who chairs Volkwagen's supervisory board, is moving to eject the automaker's CEO, Martin Winterkorn, seen here standing in better days.
  • Why it matters

    Why it matters

    Held by the Piech and Porsche families, Porsche Automobilholding SE controls the sport car maker’s parent Volkswagen.

  • Facts

    Facts

    • Profits are up 27 percent in the first half of 2014, compared with the same time period last year.
    • The completion of the sale of the auto manufacturing unit to Volkswagen Group in 2012 has allowed Porsche’s holding company to pay off all its debts.
    • Shareholder lawsuits related to the Porsche failed attempt to swallow Volkswagen, but so far the company has successfully defended itself from litigation.
  • Audio

    Audio

  • Pdf

Europe’s largest carmaker Volkswagen is pouring money into the coffers of Porsche’s holding company. After taxes, profits for the first six months of 2014 accelerated 27 percent to €1.47 billion ($1.97 billion) at the Salzburg-based Porsche Automobilholding SE.

After selling Porsche’s car manufacturing unit in 2012 to VW, Porsche SE is purely a financial holding company with just 36 employees. Currently, Porsche’s holding only has shares in Volkswagen, where it has more than half of all voting rights and about one-third of its capital.

The Piech and Porsche families – the patriarchal clans of the two iconic automobile brands – now wield sole control over the holding company since they bought out the 10 percent stake held by Qatar Holding, the direct investment arm of the $100 billion Qatari sovereign wealth fund. The purchase price was not disclosed.

Just two years ago, Porsche SE was burdened with €2 billion in debt, but proceeds from the sale of the car making unit allowed the company to pay it off. As of June 30, the holding had €2.65 billion in its coffers. Porsche has said it wants to use profits to invest in future technologies within the automobile sector, but so far, the company hasn’t revealed any potential takeover targets.

Clouding the future is the legal aftermath of the twisted takeover deal between Porsche and Volkswagen Group, which finally closed in 2012 after years of wrangling between the two automakers.

Billions of euros in lawsuits have been filed by investors, who accuse Porsche of misleading them in the run-up to the deal. Additionally, there are eight lawsuits pending in the U.S. federal courts. Porsche has had some success fighting the lawsuits, but the ongoing legal woes are not likely to disappear soon. Yet the company remains confident it can put the brake on all the litigation, setting aside only €40 million for possible costs related to the ongoing court cases.

If Porsche succeeds in blunting the financial impact of the litigation, the road ahead looks smooth.

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