Wild Ass Rumor of the Day, or Not: Daimler to Buy Porsche to Buy VW

Bertel Schmitt
by Bertel Schmitt

On Friday evening, a wild rumor whirred via the wires. It started at Germany’s usually well informed Manager Magazin, then spread to Reuters and Bloomberg: Daimler may be taking a stake in its Stuttgart neighbor, Porsche. Through Porsche, Daimler would own a part of Volkswagen.

According to Manager Magazin, Daimler’s Zetsche and Porsche’s Wiedeking have had negotiations since May. Not surprising as in May it had become very apparent that Porsche was unable to finalize the Volkswagen takeover. In May, Ferdinand Piech, part owner of Porsche and Chairman of Volkswagen, made loud noises about VW taking over Porsche instead and sending Wiedeking to Siberia. Or more warmer places. Like Hell. The matter turned into a billion Euro soap opera. Wiedeking talked to anybody who may have money, the Sheikh of Qatar, and why not Daimler, they live next door.

This Friday was a special day for Porsche. They announced their ten-month report of their 2008/2009 fiscal. Cars down, derivatives up. On Friday, 640K call options on the VW stock came due, along with 638K put options. Porsche is rumored to be behind most of the unusually high volume. It could be a highly risky short straddle engineered by Porsche CFO Härter, Manager Magazin thinks that the puts could also be insurance bought by the banks who sold the calls to Porsche. Porsche doesn’t have the money to exercise the calls. If the calls expire, the banks (market makers in Germany) could sell the underlying VW shares, shares drop, a big no good for the 51 percent owner, Porsche. Porsche is NSFWd. Manager Magazin thinks the banks gave Porsche a stay of execution—so to speak—and told Porsche to come up with the money elsewhere. The banks have Porsche by the short and curlies. A little payback for last year’s short squeeze, that cost banks and funds billions, and claimed at least one life.

Enter Daimler. Daimler could take the derivatives off Porsche’s hands, exercise them, and voila, own 25 percent of Volkswagen. Daimler could also buy a chunk of Porsche shares outright. Manager Magazin says Wiedeking asked the Porsche/Piech families last week for permission to sell Porsche shares to external investors. The families said no, but will re-visit the matter next week.

Daimler recently got money from Qatar’s neighbor Abu Dhabi. A 9.1 percent stake was sold to Abu Dhabi’s state-controlled International Petroleum Investment Company (IPIC) for almost €2 billion ($2.78 bn). That puts a €22 billion valuation on Daimler. Car companies come cheap these days.

In the denial dept., Reuters reports that “a spokesman for Daimler called the report ‘pure speculation’ and a Porsche spokesman said he had no knowledge of talks with Daimler. A Volkswagen spokesman did not want to comment on the report.”

“We absolutely don’t comment on speculation,” Hartmut Schick, a Daimler executive, told Bloomberg. Schick would neither confirm nor deny the report.

At least Daimler got it right. Pure speculation it has always been. Daimler is not doing so well either. Benzes are a tough sell. S&P just downgraded Daimler from A to BBB+.

Anyway, “an industry source told Reuters that the report should be taken seriously.” Didn’t someone say that the industry has to consolidate? Sell Opel to Russia (or if all fails, to China), create a Volksporschedaimler (owned by Austrians and Saudis), and if BMW doesn’t come on board, NSFW ’em. Sounds boring and benign compared to what else is happening in the car world. Anyway, Porsche and Daimler go a long ways back. About 100 years.

Austro Daimler revisited? Picture courtesy flickr.com.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Stuki Stuki on Jun 21, 2009

    John Horner, Currency hedges are derivatives as well. They're almost a requirement for industrial companies in our long, international supply line world. And stock options as compensation are almost a necessity for cash starved startups. Employees can, if they really care that much, refuse to work for any company that trades in options.

  • TonyJZX TonyJZX on Jun 21, 2009

    what happened to that wild BMW/Daimler tie up? since they had so many 'synergies' - both heavy in RWD platforms... BMW were even interested in getting into commercial vehicles

  • Lou_BC I've been considering a 2nd set of tires and wheels. I got stuck in some gooie mud that turned my Duratrac's to slicks. I personally would stick to known brands and avoid Chinesium knock-offs.
  • Carson D How do you maximize profits when you lost $60K on every vehicle you produce? I guess not producing any more vehicles would be a start.
  • Carguy949 You point out that Rivian and Tesla lack hybrids to “bring home the bacon”, but I would clarify that Tesla currently makes a profit while Rivian doesn’t.
  • Cprescott I'm sure this won't matter to the millions of deceived Honduh owners who think the company that once prided itself on quality has somehow slipped in the real world. Same for Toyoduhs. Resting on our Laurel's - Oh, what a feeling!
  • Jrhurren I had this happen numerous times with my former Accord. It usually occurred when on a slow right curve in the road. Somehow the system would get confused and think the opposite lane (oncoming traffic) was an impending head-on collision.