Volkswagen is considering a plan to turn its back on Porsche in an IPO

Volkswagen has said it is considering turning its profitable Porsche division into a separate company with a separate listing of shares. The transaction will help the automaker raise money to invest in electric vehicles while potentially handing more control over the high-performance automaker to the founder’s descendants.

Volkswagen preferred stock, the most widely traded stock, rose 9% on Tuesday after the company said it had negotiated a “framework agreement“With Porsche Automobil Holding, an investment vehicle for the descendants of Ferdinand Porsche, who founded the company in the 1930s.

The parent company, which owns 51% of Volkswagen’s voting shares, said in a statement that it may purchase shares of an independent Porsche automaker as part of the transaction. If so, the family could trade shares in Volkswagen, one of the world’s largest automakers, for a larger share of Porsche, which provides a third of the parent company’s profits.

The transaction must be approved by Volkswagen’s supervisory board and could be vetoed by the state of Lower Saxony, which has two seats on the 20-person council, and Volkswagen workers, who have 10. The transaction will generate cash that Volkswagen can use to manage the costly transition to electric vehicles, but it will also reduce the company’s share of Porsche’s profits. Volkswagen will likely retain a stake in Porsche, although its exact scale remains unclear.

Stephan Weil, chancellor of Lower Saxony and a member of Volkswagen’s supervisory board, said in a statement that he could not comment on the proposed deal.

A side story will be the latest chapter in the long and often tense relationship between the Porsche and Volkswagen families. Ferdinand Porsche designed the Volkswagen Beetle for Adolf Hitler in the 1930s and oversaw the construction of the massive factory in Wolfsburg, Northern Germany, which remains the heart of Volkswagen’s operations.

After World War II, Porsche’s son Ferdinand adapted Volkswagen components to create the first Porsche sports car. Over the following decades, Volkswagen supplied parts to the sports car manufacturer and sometimes produced Porsche-branded vehicles. For example, a Volkswagen plant in Slovakia produced the frames and bodies for the Porsche Cayenne sport utility vehicle, which were finished at a Porsche plant in Germany.

Although the companies are closely linked, the Porsche family does not own a substantial stake in Volkswagen. That started to change in 2005 when Porsche, with profits from the Cayenne, started using derivatives to gain control of Volkswagen stock.

Two top Porsche executives were later charged, but in the end acquit, of stock market manipulation after the 2008 financial crisis almost set off a torpedo for the takeover attempt. In 2009, over the objection of some shareholders that the Porsche family was being treated favorably, Volkswagen agreed to buy Porsche’s car business. The deal gives the Porsche family a majority of Volkswagen’s voting stock and a quarter of seats on the larger company’s supervisory board.

Ferdinand Dudenhöffer, director of the Center for Automotive Research in Duisburg, Germany, says the proposed extra is another example of family interests taking precedence.

The family, Mr. Dudenhöffer said in an email, “are the winners and are securing their investment. Volkswagen, with its distorted governance system, is a loser.”

Both Porsche and Volkswagen have made a big splash in the field of electric vehicles. Porsche has done well with its Taycan sports sedan, selling more than the flagship 911 and more than Tesla’s Model S and Model X 2021.

Volkswagen and luxury brand Audi have had more mixed results with their electric vehicles. Some like the ID.3 and ID.4 have performed well, but others, like the Audi e-tron SUV, have fallen behind comparable models from Tesla and other automakers. Sales were also constrained by a global shortage of computer chips. Volkswagen is considering a plan to turn its back on Porsche in an IPO

Fry Electronics Team

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