By on July 5, 2009

The power struggle between Wendelin Wiedeking of Porsche and Ferdinand Piech of Volkswagen has attracted other suitors. The German magazine Focus reports that three additional bidders are interested: two sovereign wealth funds (read: goverments which are tired of investing their money in T-bonds) and a hedge fund. The nationalities of the sovereign wealth funds are interesting. One is the Russian fund and the other is Chinese, says Focus. The identity of the hedge fund is unclear.

Like the Sheik of Quatar, who has already made his interest known, the three new bidders are interested in an engagement in Porsche, and in Porsche’s package of Volkswagen options. This would give the successful bidder double access to Volkswagen: With the options, the bidder could buy more than a fifth of Volkswagen at a highly discounted price. With a share of Porsche, the bidder could partake in the 51 percent interest Porsche holds in Volkswagen. Or they could profit from a takeover play for Porsche by Volkswagen, co-engineered with the state of Lower Saxony (which holds 20 percent of Volkswagen).

In any case: These funds are not interested in Porsche because Porsche makes nifty cars. It is an interest in Volkswagen. For nobody would make this more sense than China. China and Volkswagen have been together since the early 80s—the Santana and the Jetta started China’s mass motorization. For a long time, VWs were more ubiquitous in China than in Germany. Both of Volkswagen’s joint ventures in China are state owned. For Volkswagen, China is where the growth is. For China, Volkswagen is where the technology is. On top of it, VW is the only large car company that turns a profit.

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11 Comments on “China Has Eyes On Volkswagen...”


  • avatar
    lw

    I doubt the Chinese can afford VW… Since a bankrupt GM is apparently worth $50 billion, imagine what VW is worth.. Could be trillions.

  • avatar
    mpresley

    This does not surprise me. As far as speculation goes, it makes more sense from the Chinese perspective than Hummer, Volvo, and so forth. I do not know much about the German state,and their thinking–at least from a strategic standpoint. Whether Germany would be interested in a significant Chinese presence on the board of VW is a question that I have no answer.

    On the other hand, I do understand the effects of an economic policy that encourages consumption at the expense of savings, imports at the expense of exports, weak currency at the expense of strong, and alien immigration at the expense of indigenous citizens. When a country gives away (or outsources) its sovereignty, including its manufacturing base, that country is dying, and eventually becomes irrelevant in an economic sense.

  • avatar
    mpresley

    lw : I doubt the Chinese can afford VW… Since a bankrupt GM is apparently worth $50 billion, imagine what VW is worth.. Could be trillions.

    The Chinese hold well over three quarters of a trillion dollars in US debt alone, and they are not happy with the investment. VW is probably worth 200-250 billion–but I’m only guessing.

    http://www.treas.gov/tic/mfh.txt

  • avatar

    If little Porsche can afford 51 percent of Volkswagen (and choke on the remaining 25) then China can pay 20 percent of Volkswagen out of petty cash. Especially if its bought via taking the option package from Porsche’s hands. Porsche doesn’t have the money to exercise the options. China won’t buy all of Volkswagen, just a share big enough to give them more presence.

  • avatar
    lw

    mpresley:

    I guess my sarcasm didn’t translate. GM is worthless.. It has negative value and will have negative value even AFTER the Ch. 11.

    It has to sell something profitable before it can have value and for the foreseeable future there is no risk of that happening.

    Once the dealer ranks have been culled and reduced to a minimum level, the US government will start buying / running dealers in politically important areas.

    We have a clear roadmap of where this is headed via Amtrak:

    http://www.thedailybeast.com/blogs-and-stories/2009-06-05/is-gm-the-new-amtrak/?cid=bs:archive4

    I wish would would have taken the $50B and bought VW, or at least a significant stake in it. Since we can apparently print money, we should buy something valuable with it while we still can.

  • avatar
    mpresley

    lw : I guess my sarcasm didn’t translate. GM is worthless.. It has negative value and will have negative value even AFTER the Ch. 11.

    Now I understand your point. I’d laugh if I was not crying…

  • avatar
    ZoomZoom

    Yum. I’ll take one of each please!

    Oh, there was an article, you say? Pesky words!

    No seriously, I’m not sure I see the plausibility of this. Just “feels” like it doesn’t come clean in the rinse. I think I’ll just wait for next week’s rumour…

  • avatar

    so…the Chinese strategy is to use slave labor to amass trillions of dollars and then buy out the foreign investors and competition?

    Where can we get slave labor from?

  • avatar

    Thermodynamics/cosmology has the concept of heat-death, when the Universe runs down, there is no concentrated energy and the whole universe is at the same temperature.
    Somewhat in that vein, I have been for some 25 years been proposing that globalism is bringing us a wage death: that is, everyone except the insanely talented will be paid 25% more than the Chinese were/are…until wages everywhere are the same.

  • avatar
    niky

    # Flashpoint :
    July 5th, 2009 at 1:24 pm

    so…the Chinese strategy is to use slave labor to amass trillions of dollars and then buy out the foreign investors and competition?

    Where can we get slave labor from?

    You had your chance. Too bad that Lincoln feller threw it all away.

  • avatar
    Stingray

    Suitors?… I’d say ravens…

    Those 2 are going to really hurt both VW and Porsche in their fight about who has the biggest penis…

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