Volkswagen Purchases Remaining Stake in Porsche, Will Likely Lose Suzuki Partnership

The atmosphere is changing at Volkswagen AG headquarters, if only a little bit: the automaker announced that it will officially increase its stake in Porsche to 100 percent. Meanwhile, executives from Suzuki say they're confident the relationship between their company and Volkswagen will end with VW selling its shares back.

Both moves would settle years-long drama between the three companies. Porsche made headlines in 2008 when it announced that it owned nearly 75 percent of VW, and that it would attempt a full takeover. Unfortunately that takeover never happened -- Porsche's debts became too large and the world's economy took a gigantic hit -- so the two companies negotiated a sort of merger in 2009 and fired Porsche's then-CEO Wendelin Wiedeking.

Meanwhile, VW was finalizing plans to purchase a share of Suzuki and share technology and information between the two companies. Suzuki later complained that VW didn't adequately share technology; VW, in turn, said that Suzuki broke the agreement when it contracted with Fiat to make diesel engines for the Euro-market SX4.

While the technology-sharing agreement between Suzuki and VW soured, the latter still owned about $2.1 billion in shares of the former. Suzuki's vice president of business development, Yasuhito Harayama, later remarked that "VW does not have the legitimacy to keep on holding Suzuki shares," which would explain why Suzuki is taking VW to court next spring in London. Suzuki hopes to purchase the shares back at market price, which could give VW between $350,000 and $400,000 in profit.

While the Suzuki resolution won't be finalized for a year, the deal with Porsche is all but done. VW will purchase a 50.1-percent stake in Porsche at a cost of $5.6 billion (in cash). It will also transfer one share to Porsche, which will allow the companies to call the deal a restructuring, not a takeover, saving about $1.24 billion in taxes. The cooperation between the two companies, which has already yielded the Cayenne SUV and upcoming Macan CUV, will probably grow even closer, especially considering that Porsche is now a majority shareholder in VW, owning 50.7 percent of it.

Sources: Bloomberg, Automotive News (Subscription required)

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