China Has Eyes On Volkswagen

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.