Piech drives toward goal of global auto empire

Ferdinand Piech made two giant strides on Monday toward forging a global automotive empire by gathering Swedish truckmaker Scania into the arms of Volkswagen and preparing Porsche in turn to take control of VW.

The bold strokes position Piech - the 70-year-old Volkswagen chairman whose Austrian family controls Porsche - as the architect of a group making everything from small cars to luxury autos and heavy trucks.

VW will take majority control of Scania in a $4.4 billion deal that brings it a major step closer to its goal of creating Europe's truck market leader along with German rival MAN.

The move to buy out Sweden's Wallenberg family ends a paralyzing stalemate over the future of Scania since early last year when it fended off a hostile bid from MAN, in which VW, Europe's biggest carmaker, owns 30 percent.

The two sides had made scant progress on a friendly deal being pushed by Piech.

"This is a major step forward for all parties involved," Volkswagen Chief Executive Martin Winterkorn told a news conference in Stockholm, stressing that uncertainty over Scania's ownership had finally been laid to rest.

"One could say that the company has been in play since January 1999. That is a very long period," Scania Chief Executive Leif Ostling added, referring to a bid from Volvo that fell foul of European antitrust regulators.

The market had barely digested the surprise news when Porsche said it was moving ahead with plans to increase its 31 percent voting stake in VW to a majority, but did not intend to merge the two carmakers.

At an extraordinary meeting, Porsche's supervisory body authorized the long-awaited move, which the maker of 911 sports cars and Cayenne offroaders said would represent an additional investment of almost 10 billion euros.

"Our aim is to create one of the strongest and most innovative automobile alliances in the world, which is able to measure up to increased international competition," Porsche Chief Executive Wendelin Wiedeking said.

Lifting its stake above 50 percent would not require Porsche to make a full bid for VW because it made an offer at the legal minimum price last year which few investors took up.

"We still believe that in the long run we will see a Porsche holding with three pillars: sport cars (Porsche), cars (VW) and trucks (VW/MAN/Scania)," DZ Bank analyst Michael Punzet said in a note to clients.

He thought the timing of Porsche's move aimed to strengthen its hand while Berlin debates a new VW law that would preserve a strong say for employees and VW's home state of Lower Saxony.

Europe's highest court last year struck down the old German law that capped individual shareholders' voting rights in VW.

Scania's more-liquid B shares surged at first but ended down 8.3 percent after Volkswagen's finance chief said VW did not envision buying out Scania's remaining shareholders.

Porsche shares gained 2.4 percent, while MAN stock advanced 4.3 percent, making them the top gainers among German blue chips.

Volkswagen will pay 200 Swedish crowns per Scania A share - a 17 percent premium to Friday's closing price - for a total of 26.94 billion crowns ($4.36 billion) to raise its voting stake in Scania to 69 percent from 38 percent. The deal is subject to regulatory approval.

Agencies

(China Daily 03/05/2008 page16)