Porsche Grabs Volkswagen: Luxury car builder now majority shareholder

Porsche AG announced late Monday it had acquired enough Volkswagen stock to become majority shareholder. Recent purchases increased Porsche's position in VW from 42 to 50.76 percent. Volkswagen share price Tuesday was up nearly 15 percent on the Frankfurt exchange.

Porsche has been maneuvering for more than a year to attain 50-percent ownership of VW but had to stand pat until soaring share prices - as much as 1,000 € - settled back to reasonable levels. At that point last year, VW's share price made it the richest car company in Europe. The price this week is hovering around 250 €.

There could not be two more different car companies. Porsche is family controlled with many mega-wealthy shareholders. Twenty percent of Volkswagen is owned by the state of Lower Saxony and with annual sales of around 100bn € is roughly 50 times larger than Porsche. Volkswagen is also heavily unionized; Porsche is not.

At present, Porsche is said to hold enough options to increase its stake in VW to 75 percent. But therein's the rub. Although a 75 percent position is normally the percent control required by German law to invoke a "domination contract" to assume complete financial control, that tipping point is 80 percent in Lower Saxony. The local law would allow the state government as 20 percent minority shareholder to take an active part in VW's business with the ability muck about in Porsche's financial plans - one of which is thought to be significant reduction of union influence. Porsche claims otherwise; but with backing from the European Commission is nonetheless challenging the "VW Law" in Lower Saxony.

Interestingly, Dr. Ferdinand Porsche designed the first Volkswagen - "People’s Car" - for Adolph Hitler in the mid-1930s. After several years of developmental fits and starts, Volkswagenwerk GmbH was set up in what is now Wolfsburg to manufacture the little cars. It would be 1946 under the supervision of the British Army that the first of the iconic VW Beetles would roll off the line - the result of a 20,000 car order placed by the Brits.