Porsche and Volkswagen Groups plan to create an integrated automotive company from August 2012
|   Wednesday, July 25, 2012
Porsche Automobil Holding SE, better known as Porsche SE and Volkswagen Aktiengesellschaft have come together to build a dedicated automotive group. Porsche is set to share its automotive wealth with Volkswagen's customer backup and operations are scheduled to take effect from August 2012.

This move has been taken keeping in mind the future prospect of the two companies and plans were on to merge the companies in 2014. The plan is set to be implemented two years in advance, keeping in mind the future benefits.


Porsche is set to give 50.1 % of its ownership to the Volkswagen Group in return of 4.46 Billion Pounds and one ordinary share in the Volkswagen Group. Porsche is all set to be a brand of Volkswagen. This decision is good for both the companies as well as Germany, as a nation.

The conduction of Porsche into Volkswagen is set to strengthen both the companies in terms of strategizing, financial and resource backup. Many new plans have already been conceived and other expansion plans are currently under pen and paper. The merger is providing both the companies an immense opportunity to grow and expand in all directions and hence, this has been the most anticipating decision in the history of the automobile industry.

Last September, the companies had announced their inability to merge within the stipulated time frame of 2009 – 2011. Apart from that, the terms of agreement do not allow them to function independently till 2014. Hence, both the companies were looking for ways to come out of the legal hassles and this decision was ultimately taken.

The new merger plans were successful because of the agreements under the Taxation of Reorganizations Circular (Umwandlungssteuererlass) and the Reorganization Tax Act (Umwandlungssteuergesetz). The merger was feasible as well as tax efficient and hence this decision was taken.

Porsche will continue to function with 50 percent of its shares till the merger takes place early next month, after which Volkswagen will be responsible for all its daily functionalities. Volkswagen spokespersons were quoted as saying that the accelerated integration is set to allow both the companies to start functioning more efficiently and fast and this is set to make the daily functioning quite easy.

The induction of Porsche into the Volkswagen group is set to benefit the image of Volkswagen and hence increase sales volumes by a considerable margin. Volkswagen is hoping for at least 20% rise in the same quarter of the next quarter as compared to the present fiscal year.

The shareholders of both the companies however need not worry as the stakes are not set to lose their value by any margin. The transactions are all transparent and any stake holder can claim to view the balance sheets at any given point of time.

The adverse effect of this merger is that, the overall liquidity of the automotive industry is set to decline by 7 Billion pounds. However, this is compensated by the 4.54 billion Pound transaction between the two companies and Porsche's negative net liquidity.
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