Page last updated at 14:16 GMT, Wednesday, 26 November 2008

Porsche set to delay VW takeover

Wendelin Wiedeking, chief executive of Porsche
Porsche's Wendelin Wiedeking said a VW takeover this year was unlikely

German luxury carmaker Porsche has pushed back its planned takeover of Volkswagen because of falling sales.

Porsche said it might not take majority control of VW this year, and that it would not pay "ridiculous" prices.

Porsche also reported pre-tax annual profits of 8.57bn euros (7.2bn; $11.1bn), helped by a huge one-off profit from moves in VW's share price.

However, it said there were signs of a "serious slump" in the car industry, especially its important US market.

Falling sales

Porsche said its earnings for the four months to November would be 15% lower than a year ago because of the downturn.

"Worldwide, signs of a serious slump in the automobile industry are clearly visible," Porsche said in a statement.

Porsche's chief executive, Wendelin Wiedeking, declined to give a full-year profit forecast, saying that "it cannot be done reliably now".

On Monday, Porsche said it had stopped assembly lines for one day at its main plant and would be halting production for seven more work-days up to the end of January because of weaker demand.

Elsewhere, in further signs of falling car sales, the Japanese car firm Toyota said it would be closing a factory in France for two weeks in December, and would slash production at the plant from next year.

VW plans

Logos of German carmaker Volkswagen to be fixed on cars
Porsche said it was under no time pressure to take control of VW

Porsche said it was standing by its plan of building up its stake in VW to 75% in 2009.

However, Mr Wiedeking said Porsche might not exceed the 50% ownership mark by the end of this year as it had planned.

"In view of the current economic environment, it is becoming increasingly unlikely that we will reach this target in this calendar year. We are under no time pressure," he said.

Porsche already has effective control over the company, and would like to take full control over strategic decisions and VW's profits next year by raising its stake.

However, German law and VW's own statutes give VW's home state of Lower Saxony the right for now to veto these plans with its own 20% stake.

Porsche's finance chief, Holger Haerter, said Porsche was not willing to acquire shares for "economically ridiculous" prices.

'Manipulation' denial

Analysts have said Porsche is likely to have made huge profits in October after it triggered a squeeze on short-sellers of Volkswagen shares by announcing it had secured access to 74% of VW votes.

It meant that just under 6% of the company's shares were freely trading on the market, and VW's share price climbed stratospherically.

Although Porsche said the announcement would let short-sellers unwind their positions "without haste or considerable risk", VW's share price rocketed to over 1,000 euros - and briefly made VW the world's most valuable corporation.

It prompted scrutiny by German securities watchdog and a complaint from the head of the country's largest retail fund management firm, who accused Porsche of breaking the law.

The firm's chief financial officer, Holger Haerter, flatly denied manipulating the share price, saying Porsche "strictly abides by the law".

"Let me emphasise and make it quite clear that our decision to acquire a stake in Volkswagen was and is based solely and exclusively on our industrial logic and not on the wish to make money at the expense of a third party," he said.

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