Porsche's hook-up with VW has paid off– big style. In the first fiscal half of 2007, the Stuttgart automaker's stake in VW generated 2.1b euros ($2.83b) for the formerly fully independent carmaker. According to Reuters, Porsche has taken steps to guard their new cash cow: they've secured financial derivative contracts to limit their foreign exchange exposure and secure the value of their 31 percent stake in VW. Porsche is also hiving-off its own car production operations into a separate corporate entity. Despite the VW-cash bonanza, Porsche CEO Wiedeking is still not satisfied by VW's restructuring progress. This from the man who's watched Cayenne sales plunged 41 percent in the last six months.
7 Comments on “Porsche “a hedge fund with a captive automotive business?”...”
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Porsche is diving into derivatives? That’s pretty risky business.
2.1b for 31% isn’t bad, sounds like Porsche should just bite the bullet and merge.
They don’t need to merge. They can just sit on that nice pile of money, possibly selling some back for development costs of their next big thing.
They may also need that money of the Panamera tanks. Given what we saw about its styling, it may very well be a dud…
As for derivatives, they can be used to hedge risks by decreasing currency exposure. Given the new heights the euro is reaching, I’d be tempted to do the same…
Buying derivatives is only risky if you don’t own the underlying security. Seeing as how Porsche actually owns a chunk of VW, and they have exposure with exchange rates, buying derivatives is actually a pretty smart move – kinda like buying insurance. oh…those wacky Germans!
I agree with farside808. Even if you don’t own the underlying security, derivatives are great ways to protect against exposure to uncertainties and catastrophic loss (and doing so comes relatively cheap).
This may be a stupid question, but what are the odds that parts-sharing will allow me to buy a People’s Porsche?
Every international auto manufacturer uses derivatives to minimize currency risk. This is nothing new.