One wonders what Ferdinand Piech, the chairman of Volkswagen, said at the weekend to Ferdinand Piech, the senior man in the Porsche family, which induced Porsche to buy great armfuls of VW shares this morning.
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“Hello Ferdi.”
“Hello Herr Piech.”
“Ferdi, we have a small problem.”
“What is that, Herr Piech?”
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By GlobalData“Well, we are losing money at Volkswagen at the moment. Quite a lot of money in fact. We have huge losses in China and the US in particular.”
“I read something like that in the paper, Herr Piech.”
“The problem is that our shareholders want us to do something about it and we can’t. We need to close a lot of factories in Europe and open elsewhere. And we need to fire a lot of people. The trouble is we don’t have the money to make the cuts and the State of Lower Saxony – you know they still have 18.2% of our shares – they don’t think that we should fire all those people because they pay most of the local taxes.”
“That’s a shame, Herr Piech. Porsche is doing OK as it happens. Record production, record profits, highest share price for years, treasury stuffed with cash.
“That’s really why I rang, Ferdi.”
“I’m sorry?”
“That bit about the treasury – being stuffed with cash.”
“What about it?”
“I was thinking you might like to buy some shares with it.”
“Shares in what, Herr Piech.”
“In VW.”
“I’m sorry?”
“In VW, Ferdi.”
“But, Herr Piech, VW is a basket case. It’s got too many conflicting volume brands, it’s over-invested in exotic brands and the core brand is shafted.”
“You’re right, Ferdi, of course, but this is not about you making money out of your investment in VW.”
“Ah.”
“It’s about you doing the right thing by the Fatherland.”
“You’ve lost me again.”
“Well if you buy a 20% stake in VW, you and I together can effectively stop any foreign person taking the company over.”
“How’s that?”
“You will have 20%, Ferdi, and VW has got 13% of its own shares held in its Treasury department.”
“That’s 33%.”
“And then the State of Lower Saxony has got 18.2%. They certainly don’t want any foreign takeovers. That would be bound to lead to massive loss of jobs locally. That’s 51.2% for the three of us. That would be certain control. A master stroke, Ferdi, eh?”
“Not quite, chairman.”
“What’s that?”
“Shareholders like the threat of take-over. It keeps the management alert and the share price buoyant. If we turn VW into a closed company, all the bid spec will evaporate from the share price.”
“Ferdi, I am alert, and I’ve told you never to do too much thinking on a Sunday.”
“Herr Piech, I really don’t like it. These shares are going to cost me €3 billion to buy. My company’s only worth €5 billion. The Porsche share price will take a dive if I do this.
“How many cars do you make a year, Ferdi?”
“Sixty thousand.”
“You’re irrelevant, Ferdi. VW makes 100 times that number. This is important.”
“But, chairman, this is a lose: lose. Your share price goes down if you build defences against take-over. Our share price goes down if we invest all our spare cash in a bad investment.”
“Ferdi, I think you must be forgetting who does all the development work for you on the SUV. And weren’t you talking about wanting some engineering support on a fourth model?”
“We don’t need to control you to get you do some engineering for us.”
“Ferdi, you have to be for the German solution.”
“OK. But stop calling me Ferdi.”
“I was in two minds about that. See you in the office on Monday.”
“Goodnight.”
At the end of trade this morning, the Porsche share price was down 9% at €617. Under the weight of Porsche’s share buying, VW was up 2% at €52.8.
Rob Golding
Porsche after 20% slice of Volkswagen
