When Two Well-known Brands Collide (Volkswagen And Porsche)

Here's amazing news from Forbes.com on the possible fusion of well-known car brands Volkswagen and Porsche!

Porsche's announcement on Monday that it had decided to take a majority stake in Volkswagen came just hours after Volkswagen itself announced it was taking majority control of Swedish truck maker Scania. Two big moves within 24 hours? It was all in a day's work for the 70-year-old grandson of Ferdinand Porsche, and typical of his bold leadership.

Piech is the chairman of Volkswagen, but also one of the biggest shareholders in Porsche, with a 13% stake. Born in Vienna, Austria, Piech cut his teeth in the car business, having started out designing and engineering new Porsche models when he was just 26.

In his golden years he has been doing a lot more corporate engineering, facilitating talks between German truck maker MAN and Swedish rival Scania, and pushing for a three way tie-up with Volkswagen's Brazilian truck business last year. That now process should get into gear now that there is little doubt about the future ownership of Scania.

In fact the tie-up of VW, Scania and Porsche spells a European auto giant that makes everything from affordable cars, to trucks, to city buses, to luxury cars and limos. Will Piech want to spin off the truck division? Probably not. The truck making industry is on a roll at the moment and companies like Scania, Volvo and Daimler are reeling from the strong demand in Eastern Europe and other emerging markets.

What Piech really wants is full, unadulterated control of Volkswagen by Porsche itself. That may seem odd to the uninitiated, since Piech is already VW's chairman. But there is a there is a psychological element behind his strategy. "Piech comes from the family that founded both Porsche and VW and he has been working his whole life to bring them back together," said Roman Mathyssek, senior auto analyst for Global Insight.

Volkswagen came about in 1933 when Ferdinand Porsche, Piech's grandfather, was commissioned by the German government to great a "volkswagen"--literally "people's car" in German--that could carry five people. The "volkswagen" went on to become its own corporate entity, though the ties to Porsche have remained strong over the decades.

Today, though there are myriad family interests to complicate matters, nothing much happens at Porsche without Piech's say so. Soon enough, nothing much will happen at Volkswagen without Porsche-as-a-company's say so.

Hence the drive to get Porsche's official stake in Volkswagen above 50%. For Porsche to use Volkswagen's research and development expertise or collaborate on a project, it'll need to go through the right corporate channels. Porsche may also push for restructuring at Volkswagen. At the moment, the State of Lower Saxony, a region in Germany that is the second largest shareholder of Volkswagen, is loathe to make job cuts at VW, but Piech may well see inefficiencies that need addressing and want to use Porsche to direct the change.

In a nutshell, says Mathyssek, Porsche will benefit from VW's breadth of technical expertise (think Audi) while VW will benefit from Porsche as a stable majority shareholder. Above all, Piech will realize his vision.

(image from Weblo.com)