The Auto Writer

German race car builder Porsche is seeking controlling interest in Volkswagen after getting the go ahead from the European Union to buy additional shares of VW. Porsche currently owns a 31% stake in the company and this past Monday the automaker’s supervisory board authorized Porsche management to begin the steps necessary to gain regulatory approval for increasing its share of VW to above 50%.

Ferdinand Porsche and Volkswagen

Volkswagen and Porsche have a long history, dating back to 1931 when Ferdinand Porsche designed the first Volkswagen or “people’s car” at the behest of Adolf Hitler. The original Beetle did not go into production until after the war as factory space was given to the Nazi regime. When full production began in 1948, the Beetle played an instrumental part in the rebuilding of what was then called West Germany.

The War Recovery

Porsche, too, had to recover from the devastation of the Second World War, and it was some of the earlier models that has led to its present day success. The 911, 914 and 924 all rose to prominence, putting Porsche at the forefront of automotive technology and leadership.

Decades of Collaboration

Over many decades Porsche and Volkswagen have collaborated on various projects, exchanging parts and even sharing a complete chassis (Porsche Cayenne and VW Touareg). All during this time Porsche continued to increase its stake in VW, but the company was stopped from gaining controlling interest by the German courts.

Since Germany is part of the European Union, it was the EU which ordered the German government to lift a cap on voting rights which up to this time has kept Porsche from increasing its share in Volkswagen.

A Global Powerhouse

Once the dust clears on the merger, the new automotive group will be an international powerhouse. Although Volkswagen will not be merged into Porsche, it will still come under Porsche control.

Volkswagen itself has been aggressively expanding and is poised to purchase Swedish automaker Scania. VW already owns Audi, SEAT, Skoda, Bentley, Bugatti, and Lamborghini. The Volkswagen Group also owns a 30% share in the German commercial truck maker MAN, the company VW wants to merge with Scania.

A Start of Something Big?

Could the blockbuster Porsche-Volkswagen deal be the beginning of something big? Specifically, with Renault-Nissan taking a stake in Russian automaker Lada, will additional mergers and acquisitions ramp up?

I recently mentioned that Chrysler is the most vulnerable automaker, predicting that America’s #3 automaker would be flipped within the next year. General Motors and Ford look to be fine for now, but what part will the booming Chinese auto market play in helping to forge new alliances?

Within the next decade, a dramatic shift in the world automotive scene is likely to take place. It looks as if Porsche has thrown the gauntlet down, possibly paving the way for other automakers to examine how they will compete in the years ahead.