Page last updated at 23:17 GMT, Monday, 2 June 2008 00:17 UK

Niche firm Porsche sets big goals

By Tristana Moore
BBC News, Stuttgart

Martin Winterkorn, head of Volkswagen and Wendelin Wiedeking, head of Porsche (r)
Mr Wiedeking wants Porsche to increase its stake in VW
From outside Porsche's headquarters, it is hard to believe that such modest offices in an old red-brick building harbour a company with such lofty ambitions.

Not only is it home to one of the world's most iconic car brands, but the firm has its eyes firmly set on Volkswagen, Europe's largest carmaker.

Inside, chief executive Wendelin Wiedeking exudes the slick confidence of a man who stands on the brink of creating one of the world's biggest car manufacturers.

His firm owns a 31% voting stake in Volkswagen, but the luxury carmaker is determined to increase this holding.

"We are still working on our plans to take over more than 50% of VW," Mr Wiedeking told the BBC.

"We have to ask many international authorities to accept our takeover. We're well within our time-frame and we're confident it will happen at the end of this year."

Luxury brand

Porsche's takeover seems like a David and Goliath tale.

Porsche, a small but highly profitable maker of expensive sport cars, is going after VW, a mass-market carmaker.

But if it manages to wrest control, the plan is to run the two businesses separately, under one holding company.

Mr Wiedeking says it is not a merger, but there are many synergies between the two carmakers.

"We believe that Porsche should be Porsche in the future, and VW should also be VW," he says.

"The Volkswagen group comprises more than one brand. It's Volkswagen, Audi, Bentley, Lamborghini, Bugatti and then there are the trucks, Scania and MAN.

Lamborghini
Porsche wants a global luxury brand with names such as Lamborghini

"We think we can build a luxury brand strategy, working together with Porsche, Bentley and Lamborghini - that makes sense."

"We can share components and ideas and be more competitive in the global market."

But why is Porsche really going after Volkswagen?

"Back in 2004-5, we noticed that the relationship between Porsche and VW was not as good as it should be, VW ran into trouble and Porsche was getting richer," Mr Wiedeking says.

Fearing that a hedge fund would acquire VW, the firm decided to take the first step. "We purchased an 18% stake and this was the beginning of a good story."

However, Porsche still has hurdles to overcome - not least dealing with fierce resistance from the unions and workers' representatives at Volkswagen.

As ever, the head of Porsche is sanguine about the future.

"If a huge manufacturer is more or less purchased by a small company, that's not normal," Mr Wiedeking says.

"It takes time to gain acceptance... We believe we can build a strong automobile organisation and strategy that makes a lot of sense for the VW works council, employers and for Porsche," he says.

Blocking minority

But what about the so-called VW law?

Recently, the German government said the controversial law shielding Volkswagen from hostile takeovers would continue to protect the interests of Lower Saxony, VW's home region. In effect, this deals a blow to Porsche, the carmaker's biggest shareholder.

The draft VW law would allow shareholders with a 20% stake to block any major decisions at annual meetings. Lower Saxony has a 20.1% stake in Volkswagen.

Porsche has urged the government to remove this clause, saying the normal blocking minority is 25% under German law and that the clause would limit its options.

Last year, the European Court of Justice ruled against the VW law on the grounds that limitations on voting rights in VW's statutes infringed EU rules on freedom of movement.

We are going to court. We know what we want, and believe me, we will get what we want
Wendelin Wiedeking, chief executive Porsche

"The main reason why the unions are not happy is because we are fighting against the VW law," he says.

"Because our politicians can't understand that Germany does not need such a law, they forced us to fight against the law."

"We simply want to see that the VW group is following the same rules as other carmakers in Germany - for example, BMW."

"We are going to court. We know what we want, and believe me, we will get what we want," he says.

Porsche undoubtedly feels it is being treated like a predatory investor in Volkswagen.

"We are one of the biggest taxpayers in Germany. Last year, we paid 1.5bn euros in taxes in Germany. But we have some friends in Europe. The European Commission is on our side," he says.

Emerging markets

But Porsche may have other more pressing problems to deal with, including the fall-out from the global financial crisis. The US is the biggest market for Porsche and the luxury carmaker is aware of how fragile the global economy is.

"I think the credit crunch will have a negative impact on the entire car market worldwide. The question is how much," Mr Wiedeking says.

"We will have more problems than we can see today, but we are prepared."

"At the moment, the crisis is not hurting our profits. Sales in America are OK. Our fiscal year finishes at the end of July and we believe that we can once again announce some good news," he says confidently.

But Porsche's chief executive appears concerned about the long-term implications of the global slowdown and says the firm may have to reduce some production figures.

"But the market as a whole is good - the emerging markets are still very strong. We are selling many cars in China, Russia and especially in the Middle East."

"We are selling cars like bread, it's unbelievable - for example, our dealer in Dubai is selling more than 2,000 cars a year," he adds.

But in the long term, the continuing weak dollar will remain a major cause for concern.

"Our dollar exchange rate is fixed until 2013... The question is, will it remain weak. If it stays weak, then we will have to rethink our strategy. We may have to build some products in the US," Mr Wiedeking says.

'Treated fairly'

German carmakers are facing growing pressure from the EU to cut their carbon footprint. It's hardly surprising that environmental campaigners have criticised Porsche for its gas-guzzling cars.

Cayenne model
The firm says it is being treated unfairly

Porsche's chief executive, meanwhile, is adamant that the carmaker takes climate change seriously. He says the firm is reducing carbon emissions by 1.7% annually and plans to introduce new technologies in the next few years.

Porsche has a prototype Cayenne hybrid.

"But Porsche will be Porsche," he admits. "It is a niche product. You can't compare Porsche with a Fiat Uno. You have to accept different emissions. We want to be treated fairly and perhaps we need special rules for all product segments," he says.

Porsche threatened a legal challenge over plans to ask drivers of high-powered sports cars in London to pay a daily 25 congestion charge but this plan is now set to be dropped after City Hall changed hands in last month's elections.

"London's congestion charge is far too high for people and it's against a special niche product and so that's not fair," Mr Wiedeking says.

"We just want to be treated fairly," he says.

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