Porsche in the fast lane?

Automobile


By Julian Sudre

Shifting into high gear is what Porsche excells at; but the recent statement from the luxurious car maker revealed it earned three times as much money from trading derivatives - or share options - as it did from selling cars. The latest news that the Stuttgart-based company made $5.2bn (3.6 bn euros) last year from those shares against just 1bn euros from its so called core carmaking business. As a result a fury of speculation erupted on all sides as Porsche could be more perceived as a hedge fund than a car maker.
But Porsche's stock has gained a hefty 70 per cent this year; with a workforce of only 12000 the volume of the company has reached 29.1 bn euros that is more than twice that of GM Corps, the world's largest automaker.

A sigh of relief was heard a couple of days ago when the company announced that it would not break up Volkswagen. Labour leaders and VW's work force were pleased to hear that their largest shareholder -- 31 per cent stake -- was keeping the current structure of the company.
Such a move could have created more confusion about the stance of Porsche as its recent critics named it a hedge fund that evidently could have taken apart VW.
Chief Executive Wendelin Wiedekin and Chief Financial Officer Holger Haerter also denied rumours of mergers but aknowleged that its stake-building in VW had caused "uncertainties" amongst some Volkswagen employees. Mr Wiedekin was lambasted when it referred to VW as a "goldmine".
Porsche has spent about $7.3bn over the last few years building up its stakes in VW and will stand to benefit heavily in the coming years of VW.
The luxury German automaker raised hackles recently when it confirmed it had set up a holding company for its VW stake that gives VW employees less influence than they are used to.
The company allocates three supervisory-board seats to VW workers and three to Porsche workers, an arrangement that is critised as inappropriate by VW labours leaders.
Shares in Porsche tumbled by 6.5 per cent today amid concern that the US economy is slowing. The company got 35 per cent of its revenue in 2006 from US sales. Operating profit fell to 1bn euros in its fiscal year through July from 1.2 bn euros a year earlier, excluding gains from VW.