Volkswagen group chairman Bernd Pischetsrieder promises his company will maintain an "arm's length" relationship with Porsche - VW new largest shareholder - according to Automotive News Europe.

VW will not change its strategy or its product plans, VW says.

But the "arm's length" relationship might be closer than it appears.

Industry insiders wonder if VW's strategy would remain untouched once the sports car maker achieves a 20% stake in Europe's No. 1 automaker.

Porsche now owns 18.53% of VW and plans to buy more stock. The companies say they will cooperate more on electronic technology. And Porsche's influence could go deeper than that.

In a call with analysts last week, VW group chairman Bernd Pischetsrieder said the automaker will gain significant savings from research and development synergies, especially in high-cost areas such as VW's next-generation electronic architecture.

Pischetsrieder said replacing electronic architectures in existing vehicles costs €120 million to €150 million. By co-developing those technologies with Porsche, "there are greater financial benefits [for VW] that make existing product plans financially more viable," Pischetsrieder said.

Porsche has told investors future co-operation with VW could save Porsche €1 billion on three future model programmes. VW's savings would be "in the same range," Pischetsrieder said.

VW said it saved one-third of its typical R&D expense by jointly developing its Touareg premium SUV alongside the Porsche Cayenne.

"If we had had to pay for the Touareg programme ourselves, we would never have made any return," Pischetsrieder said.

Analysts have speculated that Porsche might use underutilised VW manufacturing capacity to build its Panamera luxury coupe, due in 2009. The production work - which could include body construction - would help VW. Joint product programmes could follow.

"Whether there are opportunities for cooperation with Porsche needs to be discussed," Pischetsrieder said, "but engineers are always creative."

But some analysts say the entire relationship is loaded with uncertainty - and friction. "It's very hard to predict from VW where the synergies are - where the net effect is," said Arndt Ellinghorst, an auto analyst with Dresdner Kleinwort Wasserstein in Frankfurt.

Industry experts say Porsche will exert its influence in other areas of VW beyond electronics. Ellinghorst believes Porsche will have enough power to influence decision-making on VW product strategy. "For Porsche, it makes sense to control the company and say, 'VW, we want this technology. We want that technology. VW, go ahead and develop it,' " Ellinghorst said.

Pischetsrieder maintained that although the German companies will work together, Porsche decision-making will not affect VW product plans. "We will not restrict and cannot restrict any of our programmes in order to avoid competition with Porsche," Pischetsrieder said.

The VW boss added that the partnership is more important for Porsche than for VW. He said VW would cancel the co-operation if Porsche sold its stake.

"For us, it's a financial benefit," he said. "For Porsche, it is a clear question of how they will develop in the future. They may see a deeper need to cooperate than us."

Either way, the fact Porsche will be a major shareholder, business partner and competitor of VW could create conflicts of interest and deter future joint venture projects, analysts say. Critics also think that product development at Audi and Lamborghini, VW's luxury brands, could be muddied by the relationship with Porsche.

To alleviate fears of potential conflicts, Pischetsrieder said VW is establishing an independent special audit of the co-operation agreements. VW also is considering a new independent shareholder committee, a subcommittee of the supervisory board, to ensure that corporate governance standards are enforced.

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