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    How Porsche will be integrated into VW and future plans

    http://www.carmagazine.co.uk/News/Search-Results/Industry-News/How-Porsche-will-be-integrated-into-VW-by-Georg-Kacher/

    How Porsche will be integrated into VW

    Although Porsche won't be a fully integrated member of the Volkswagen group before mid-2011, the sports car maker can even at this early point in the merger no longer make independent strategic decisions. After all, Martin Winterkorn has effectively been appointed head of the Porsche SE Holding which in turn employs the Porsche AG chairman Michael Macht. 

    With a takeover as costly and complicated to fund as this one – all in all, VW will have to fork out a staggering €16 billion to absorb the latest family member – it is only logical that the new owner wants to get the restructuring process going asap.

    Overnight, Porsche has become easily VW's most expensive brand.

    How VW will integrate Porsche

    To protect and eventually enhance its value, the powers in Wolfsburg will leave no stone unturned to rearrange the product portfolio, to streamline R&D, to shake up purchasing and production, and to ensure a variety of synergies which are estimated to range from €500m to €750m per year.

    To protect the iconic new acquisition, Porsche will be put in charge of certain key engineering projects which are bound to involve other nameplates to generate additional volume and to cut cost.

    Says a voice from the top: 'It would be foolish not to explore the Porsche know-how, expertise and sports car leadership. It would be foolish not to let them mastermind what they are best at. But it would be equally foolish to peg future growth on overweight and oversize four-door Porsches.'

    Sounds like a fundamental review of Porsche's model line-up?

    At this early stage in the consolidation process, the corporate strategists continue asking fundamental questions. Like whether SUVs and crossovers will in 10 years' time still be compatible with the Porsche brand. Like which products might be best suited to double the production output from 75,000 to 150,000 units. And like how to define, market and sustain the premium lean and green sportiness Porsche must stand for in the future.

    According to more than one company insider, the Swabians will from now on work closely with Audi which is the group's biggest cash cow by a country mile. Together, both brands will develop new technologies, materials and processes.

    Audi and Porsche will be the key players within the group's freshly established MSS framework, short for Modular Sports Car System, a
    matrix conceived for future high-performance vehicles. In this scenario, the two partners would jointly create a new mid-engined coupé/roadster known internally as Audi R4/Porsche 356, the next Q5 and the Cayenne replacement.

    So big Audis and Porsches will be jointly developed as well?

    You bet. And other brands further afield in the Volkswagen empire may be thrown into the mix too. Imagine a common aluminium-intensive multi-material spaceframe architecture for the Panamera II, the small-volume Lamborghini Estoque luxury sports saloon and the follow-up to the A7 Sportback.

    Long-term, even Boxster and 911 are bound to become full-time MSS members. The only models excluded from the common components concept under Wolfsburg's current plans are low-volume halo models like the next Murcielago, any Bugatti or the still unconfirmed Porsche supercar destined to replace the Carrera GT.

    A future 911 on an Audi platform! Whatever next?

    Speaking of the next 911 dubbed 991, rumour has it that messieurs Winterkorn and Piech were not totally convinced when they recently saw the production-ready design exercise for the first time.

    The new chiefs demanded, among other things, substantial changes to the front and rear ends – a move which would delay the introduction by three to six months to model year 2012. Somewhat miffed and obviously demotivated, the Porsche design and engineering squad pointed out that the required alterations will invariably deliver a serious blow to the budget.

    Quipped Piech, allegedly: 'This may be the case. But it's our money which is at stake, not yours.'
     


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    Dedi La vita è troppo corta per non guidare italiano.....

    Re: How Porsche will be integrated into VW and future plans

     'Speaking of the next 911 dubbed 991, rumour has it that messieurs Winterkorn and Piech were not totally convinced when they recently saw the production-ready design exercise for the first time.

    The new chiefs demanded, among other things, substantial changes to the front and rear ends – a move which would delay the introduction by three to six months to model year 2012. Somewhat miffed and obviously demotivated, the Porsche design and engineering squad pointed out that the required alterations will invariably deliver a serious blow to the budget.

    Quipped Piech, allegedly: 'This may be the case. But it's our money which is at stake, not yours.'
     

    Is it possible that Porsche design will move into the 21st. Century? I sure hope so.


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    Re: How Porsche will be integrated into VW and future plans

    If that's is really what Piech said, then god help Porsche, Piech is thinking with his dick and not his brain.

    There really is no hope for Piech, he is surely going to ruin Porsche.


    Re: How Porsche will be integrated into VW and future plans

    Whoopsy:

    If that's is really what Piech said, then god help Porsche, Piech is thinking with his dick and not his brain.

    There really is no hope for Piech, he is surely going to ruin Porsche.

    His track record with the VW brands, and the legends he created with Porsche in his early years, direct to the opposite conclusion.

    Anyway all these are journalistic rumours and internet forum gossips, so don't take them at face value


    --
    It's not where you're going, it's how you get there that counts

    Re: How Porsche will be integrated into VW and future plans

    Right now, the 991 seems to be on track.

    Piech and Winterkorn started to evaluate the Porsche model line and future models, they didn't get into details yet.

    Regarding Piech as a person: as much as Porsche lovers seem to hate this man right now, you guys should know that Piech is a car nut AND a Porsche nut.

    I was in Leipzig when he picked up his Carrera GT and drove it personally back to Austria.

    I've never heard of Mr. Wiedeking driving even more than 50 km in a Carrera GT. Just for the book.

    I don't think that Piech is bad for Porsche, on the contrary, he is a very technical person, an engineer. I expect from him to put more pressure on Porsche to bring out more exciting cars at affordable prices. If Porsche starts to hit the 200000 EUR "limit" on a regular basis, this brand will be history. A fully equipped Panamera Turbo is already close to 190000 EUR, this is too much. A Panamera Turbo S will already hit the 200000 EUR mark.

    Porsche is very valuable to VW, I don't think that they plan anything which would hurt Porsche and especially the marketing flagship, the 911.


    --

    RC (Germany) - Rennteam Editor 997 Turbo, Cayenne Turbo S, BMW M3 Cab DKG, Mini Cooper S JCW


    Re: How Porsche will be integrated into VW and future plans

    Very correct comments


    --
    It's not where you're going, it's how you get there that counts

    Re: How Porsche will be integrated into VW and future plans

    RC:

    Right now, the 991 seems to be on track.

    Piech and Winterkorn started to evaluate the Porsche model line and future models, they didn't get into details yet.

    Regarding Piech as a person: as much as Porsche lovers seem to hate this man right now, you guys should know that Piech is a car nut AND a Porsche nut.

    I was in Leipzig when he picked up his Carrera GT and drove it personally back to Austria.

    I've never heard of Mr. Wiedeking driving even more than 50 km in a Carrera GT. Just for the book.

    I don't think that Piech is bad for Porsche, on the contrary, he is a very technical person, an engineer. I expect from him to put more pressure on Porsche to bring out more exciting cars at affordable prices. If Porsche starts to hit the 200000 EUR "limit" on a regular basis, this brand will be history. A fully equipped Panamera Turbo is already close to 190000 EUR, this is too much. A Panamera Turbo S will already hit the 200000 EUR mark.

    Porsche is very valuable to VW, I don't think that they plan anything which would hurt Porsche and especially the marketing flagship, the 911.

     

    I fully agree Smiley


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    Re: How Porsche will be integrated into VW and future plans

     Well, they finalize the integration and Porsche will be the 10th brand of VW. In the future it will be Porsche, a division of VW, like Chevy was a division of GM. The brand will share parts and other cues including I suspect styling.


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    Re: How Porsche will be integrated into VW and future plans

    nberry:

     Well, they finalize the integration and Porsche will be the 10th brand of VW. In the future it will be Porsche, a division of VW, like Chevy was a division of GM. The brand will share parts and other cues including I suspect styling.

    Sure, like Lamborghini and Bentley share styling cues with SEAT and Skoda Smiley


    --
    It's not where you're going, it's how you get there that counts


    Re: How Porsche will be integrated into VW and future plans

    i too think that piech will drive porsche in the right direction. he is an engineering nut and only the best will do for him.


    --
    Speed has never killed anyone, suddenly becoming stationary... That's what gets you.

    Re: How Porsche will be integrated into VW and future plans

    RC:

    Regarding Piech as a person: as much as Porsche lovers seem to hate this man right now, you guys should know that Piech is a car nut AND a Porsche nut.

    ... I don't think that Piech is bad for Porsche, on the contrary, he is a very technical person, an engineer. I expect from him to put more pressure on Porsche to bring out more exciting cars at affordable prices.

     I'm a big fan of Piech.  His involvement with Bentley has been very good for the brand and numbers among the reasons I have bought more than one Arnage.  I trust him to do the right thing by my automotive interests.

    Another reason really I like him is for his infamous and insightful statement from decades ago (paraphrase) that, "Car companies with a future are run by engineers, those with diminished prospects are run by accountants, and those ready to die are run by lawyers."  This was impolitic in the industry at the time, ruffled many feathers, and amused me greatly.


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    Mike

    2005 Carrera GT - Signal Yellow + 2008 Tesla Roadster - Thunder Gray +1972 BMW 3.0 CSi - Nachtblau +2009 Bentley Arnage T - Black Saphire


    Re: How Porsche will be integrated into VW and future plans

     

    reginos:
    nberry:

     Well, they finalize the integration and Porsche will be the 10th brand of VW. In the future it will be Porsche, a division of VW, like Chevy was a division of GM. The brand will share parts and other cues including I suspect styling.

    Sure, like Lamborghini and Bentley share styling cues with SEAT and Skoda Smiley

    In fact, Donckerwolke, formerly Lamborghini´s head of design, is now in charge for Seat. Van Braeckel, formerly working for Skoda, is now head of design at Bentley. So there is some truth in your comment. Smiley

    However, I do not expect Volkswagen to make the same strategic mistakes that GM did with their brands. I´d say the amount of shared technology and components within Volkswagen´s brands is as high as it should get.

    For years, people complained about Wiedeking´s money-driven decisions, now Volkswagen provides with management and technology that Porsche can only benefit from. Consider the progress at Bentley or Lamborghini since taken over by VW, imagine what can be done at a company that is well-founded right from the beginning.

     

    intouch1:

    i too think that piech will drive porsche in the right direction. he is an engineering nut and only the best will do for him.

    I agree, Winterkorn and Piech are smart enough to preserve Porsche´s status as a brand.


    Re: How Porsche will be integrated into VW and future plans

    Judging from how Piech manage all the brands within VAG, I just don't see how it's good for Porsche. Seat, Skoda and VW are pretty much competing against each other for customers in the same seqment, and with Piech pushing VW upmarket, it's stealing customers from Audi. Audi in turn is poaching customers away from Lambo with the R8. Audi is also pretty much in direct competition with Porsche across the whole Porsche product range. At the high end Bentley with it's Continental is also competition with Lambo for the same market. Only Bugatti is all by itself in the market place yet that market is quite tiny and maybe unsustainable.

    How is Piech going to integrate Porsche into VAG without hurting Porsche's products when there are direct competitions inside the VAG? He is definitely not going to trim his 'baby' Audi to accommodate Porsche that's for sure.

    Platform sharing is good for the bottom line for a car companies, but it really cheapens the more expensive versions. Take off the outer shell, a Bentley Continental Flying Spur is just and Audi A8, and the Audi A8 is just a nicer version of the Phaeton. What's the point?

    Piech is a brilliant engineer, no question about it but he is piss poor at managing his assets, his brands within VAG is still a mess and he has yet to sort out his own house.


    Re: How Porsche will be integrated into VW and future plans

    You talk too much about Piech who is 70+ years old and by the time Porsche's current model range will be up for replacement, most probably he won't be at VW and perhaps on the planet.


    --
    It's not where you're going, it's how you get there that counts

    Re: How Porsche will be integrated into VW and future plans

    Whoopsy:

    Platform sharing is good for the bottom line for a car companies, but it really cheapens the more expensive versions. Take off the outer shell, a Bentley Continental Flying Spur is just and Audi A8, and the Audi A8 is just a nicer version of the Phaeton. What's the point?

    Do you really think that Rolls-Royce and Bentley cars had technologically superior platforms before those brands were bought by BMW and VW respectively?


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    fritz


    Re: How Porsche will be integrated into VW and future plans

    I understand that Piech is an engineer and a car guy. The problem is that he may want  to put his imprint on the 911 and change it at the core. He may actually end up with a great car. The question is, will it still feel like a 911?

    The rumor is that the 991 has again a 10cm longer wheelbase... that wheelbase is as long or longer as the Cayman's. The next step is to switch engine/tranny positions around and make it mid-engine. It may still look from the outside as a 911 but it will not be a 911 or feel like one. This is the danger I see. 


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    _________________________________________________________ 

    A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.


    Re: How Porsche will be integrated into VW and future plans

    Whoopsy:

    Judging from how Piech manage all the brands within VAG, I just don't see how it's good for Porsche. Seat, Skoda and VW are pretty much competing against each other for customers in the same seqment, and with Piech pushing VW upmarket, it's stealing customers from Audi. Audi in turn is poaching customers away from Lambo with the R8. Audi is also pretty much in direct competition with Porsche across the whole Porsche product range. At the high end Bentley with it's Continental is also competition with Lambo for the same market. Only Bugatti is all by itself in the market place yet that market is quite tiny and maybe unsustainable.

     

    Volkswagen´s mainstream brands are aiming at different customer groups and markets. In those cases where they intersect, the different pricelevels prevent enticement by competitors.

    Neither can I see migration of Bentley customers to Lamborghini, totally different brands with different values, nor Audi doing the same with the smaller ones.

    As a part of the Porsche clan, Piech has been closely associated with Porsche, even after the family´s dismissal at ´71. As I have said, Winterkorn has been Piech´s protegé due to equal-minded mindset. If there is anything I´d fault Piech for is the focussing on big projects while neglecting decisive details.


    Re: How Porsche will be integrated into VW and future plans

    Some well articulated thoughts by RC and a very funny quote of Piech by W8MM! This is good reading, thanks.

    So my question regards the future; who else besides Piech is especially influential at VAG? I'm in the camp that thinks Piech will be an asset to Porsche. However, as someone else already mentioned, he *is* 70+ years old and will not be leading VW forever.


    --
    2008 Boxster S

    Re: How Porsche will be integrated into VW and future plans

    Those Skodas and Seats and VW Polo, Golf etc are just too close to be able to target different demographics.

    To us car enthusiasts, we can differentiate different cars from different segments, we separate the GTs to the sports car to the hard core track special to the sporty GTs. But can the average consumer do the same?

    When someone is rich enough, the difference in price say between a Gallardo and a R8 or even a Bentley is neglectable, just like the difference between a $1.50 coffee or a $4 Starbuck, or a $2000 TV vs a $2500 TV to someone who can afford.

    When price became a moot point, people shop according to the contents. Say that certain someone is in the market for a 'supercar', he wants a 2 seater, then say mid-engine, and wants awd for foul weather, what's left in the market? R8 and Gallardo. He might choose the R8 simply because it's the newer car vs the Gallardo. We can tell the difference and may not cross shop the 2 of them, but not everyone are like us.

    Or, someone wants a 'supercar', wants awd for foul weather, the choices will be awd versions of 911, Gallardo, 2 versions of R8 and the Continental. Wants 4 seats for his kids, so between the 911s or the Continental. Maybe he ended up choosing the Continental because of a bigger trunk or 911s because of a smaller car.

    Weird comparisons to us who are car educated, but entirely possible and happening all over the world daily. Especially more in the new money countries like Russia or China, and those are THE market for manufacturers to tap into.

     


    Re: How Porsche will be integrated into VW and future plans

    Whoopsy:

    Those Skodas and Seats and VW Polo, Golf etc are just too close to be able to target different demographics.

    To us car enthusiasts, we can differentiate different cars from different segments, we separate the GTs to the sports car to the hard core track special to the sporty GTs. But can the average consumer do the same?

    When someone is rich enough, the difference in price say between a Gallardo and a R8 or even a Bentley is neglectable, just like the difference between a $1.50 coffee or a $4 Starbuck, or a $2000 TV vs a $2500 TV to someone who can afford.

    When price became a moot point, people shop according to the contents. Say that certain someone is in the market for a 'supercar', he wants a 2 seater, then say mid-engine, and wants awd for foul weather, what's left in the market? R8 and Gallardo. He might choose the R8 simply because it's the newer car vs the Gallardo. We can tell the difference and may not cross shop the 2 of them, but not everyone are like us.

    Or, someone wants a 'supercar', wants awd for foul weather, the choices will be awd versions of 911, Gallardo, 2 versions of R8 and the Continental. Wants 4 seats for his kids, so between the 911s or the Continental. Maybe he ended up choosing the Continental because of a bigger trunk or 911s because of a smaller car.

    Weird comparisons to us who are car educated, but entirely possible and happening all over the world daily. Especially more in the new money countries like Russia or China, and those are THE market for manufacturers to tap into.

     

     At the end of the day, if the " new money, car-virgin " emerging economy buyer  who was riding a bus or bicycle as his only mode of transport just 5-10 years ago is cross shopping such different brands , VAG wants a serious model  in every segment you mention and will gladly bank the money in the same acct.  

    BMW, Mercedes, GM,Toyota, Nissan/Renault have nothing like VAGs market breadth. Heck none of these big players who sell in the US have even ONE current mid-engined nameplate  vs VAG's six , soon maybe nine. 


    Re: How Porsche will be integrated into VW and future plans

    VAG is THE car company in the world.

    You can spend your whole life driving VAG products in whatever segment or niche you choose and be utterly satisfied without the need to ask for anything else. From superminis to hypercars, all acclaimed in their respective classes.

    In this context Porsche (and the many friends of the brand) can only benefit. IMO the rest of the debate is redundant and superfluous talk.


    --
    It's not where you're going, it's how you get there that counts

    Re: How Porsche will be integrated into VW and future plans

    I have to agree, VAG is THE mega car group left in the world, Ford had spun their top brand Aston Martin and most of their other top tier makes, GM is only a shadow of it's former self, BMW/RR, MB are also a few sizes smaller.

    Within the VAG umbrella, I like the Gallardo, I like the S8 and R8, but at the end of day I still stick to my Porsche over the R8 and Lambo, R8 doesn't have the heritage like the 911 and the Lambo is not in the same league as the Porsche in terms of everyday usability and reliability.

    Couple years ago I was this ][ close to buying a S8, the salesman was so confident that he would make a sale he gave me a full week of test drive. I admit I was quite in love with that car but the deal breaker was the trunk, it was maybe an inch or two too narrow for my golf clubs, it was big but the shape was wrong. Unlike the original Bangle 7 where the trunk was smaller than the S8 but was that little bit wider where I can fit 4 sets of clubs properly, the S8's trunk forces me to put them in diagonally and ended up with only 2 sets and a lot of wasted space.

    Also at that time the residual was murderous, for a 3 year lease the end value was only 38%, second lowest I have eve see, only car lower was a Jauguar XK.

    My beef is Piech keep mismanaging the brands, with Audi poaching on every brand within the group and VW stretching out just about the same, which really leaving not much room for anything else.

    IF Piech decide to keep 911 only for Porsche and killing off everything else, is the brand going to be able to self-sustaining without constant injection of cash from VAG? Will it be filed under Audi like Lambo and live on without dignity? Will the future Porsche be able to keep refreshing it's 911 lineup without volume/revenue from the current expanded lineup? Or will it go on like Bugatti, staying alive on IV drips with a one car lineup and can only afford to push out new models every 7-10 years? Piech could push his engineers to make one of the most desirable 911 in a few years maybe in the form of a redo 991, but will he also have a sound business case to go with the car?


    Re: How Porsche will be integrated into VW and future plans

     It may be instructive to approach the problem with the question "What is Porsche standing in the automotive world today and how can it be improved?"

    Brand Identification: Quality, reliability and highest consumer satisfaction

    Car Segment: Consistently top sport car in the world known for excellence in engineering and performance

    Value: performance/price measure tops in the industry

    Profitability: best in the industry

    Safety: Again one of the best in the industry

    So exactly what will VW bring to Porsche improve it? Whenever you are the best at what you do, change becomes an agent of degradation.

    Just hope they don't tinker with it too much. A few styling changes would be helpful but beyond that, change for change sake will be damaging to the company.


    --

     


    Re: How Porsche will be integrated into VW and future plans

    speaking about actual situation...

    http://www.businessweek.com/ap/financialnews/D9C6HOP81.htm

    Porsche revenue down 12 percent in 2008-9

    Porsche said Wednesday that its revenue declined by 12 percent in the past financial year as the economic crisis hit the car market, but said it expects improving sales in the current year.

    The sports car maker said revenue totaled euro6.6 billion (nearly $9.9 billion) in the 12 months that ended July 31. Unit sales declined by a sharper 24 percent to 75,238 vehicles, it added.

    The smaller drop in revenue resulted from the fact that higher-value 911 models accounted for a greater proportion of sales than previously, while sales of the more economical Boxster range dropped more sharply, Porsche said.

    Porsche said its total car production declined by 27 percent over the previous financial year to 76,739 vehicles.

    The company said its management is "optimistic as to the development of the company" in the current financial year.

    Porsche "expects a revival in sales," it said in a statement, adding that it "can count on an attractive range of products, including the new Panamera, in particular."

    Stuttgart-based Porsche Automobil Holding SE reiterated in its full-year report that it had a pretax loss of euro4.4 billion ($6.6 billion) because of costs related to its attempted takeover of Volkswagen AG. That compared with a pretax profit the previous year of euro8.6 billion.

    For the current year, chief financial officer Hans Dieter Poetsch said he expected a loss "in the low single-figure billion euro region."

    Porsche also confirmed that it eked out a net profit for 2008-9 of euro8.23 million after drawing euro1 billion from revenue reserves -- allowing it to pay out a small dividend.

    Porsche initially released those two figures on Nov. 12.

    Porsche accumulated heavy debt in a failed attempt to take over larger auto maker Volkswagen, with which it is now slated to merge.


    --
    Dedi La vita è troppo corta per non guidare italiano.....

    Re: How Porsche will be integrated into VW and future plans

    VW/Porsche post £1.7bn profit

    26 November 2009

    Volkswagen and Porsche recorded total profits of £1.7 billion in the first half of 2008, despite the global recession.

    According to the giant German car maker, Volkswagen made a 2.4 per cent profit margin on its car sales, while Porsche AG made an industry-leading 10.3 per cent.

    However, the huge financial shock of Porsche’s abortive attempt to take over the Volkswagen Group is reflected in the company’s individual accounts.

    Porsche SE, the holding company that was created for the VW takeover, lost £3.9bn. In the previous financial year Porsche SE made £7.7bn profit. Porsche is now on course to lose its independence and is being absorbed by the wider VW Group.

    Despite Porsche’s operating-level profitability, the company saw sales crash 24 per cent, to 75,238 vehicles. Porsche shifted 27,070 911s (down 14 per cent) and 13,140 Boxsters and Caymans, down 40 per cent. However, Porsche blames the crash in mid-engined sales on new models being introduced last February.

    Porsche’s best-seller was again the Cayenne SUV; 35,265 units were shifted, 25 per cent down on the previous financial year. The company took a big hit in North America, where sales fell to 19,024 units, down from 31,818 in the previous year.

    Interestingly, Porsche revealed that just 2146 Boxsters were built at the Zuffenhausen plant in Stuttgart. Valmet in Finland built 12,257 cars for Porsche, including the majority of Boxsters and all Cayman production.

    Porsche AG boss Michael Macht revealed at the financial conference that the Cayenne petrol hybrid would be launched next year; it should be capable of averaging 31mpg. He also confirmed a hybrid version of the Panamera.

    Macht emphasised the success of the joint project that produced the Cayenne, VW Touareg and Audi Q7 SUVs and suggested that the merger of VW and Porsche will build on this cooperation, while protecting Porsche’s individuality.

    "Two things are absolutely clear: First, a Porsche always remains a Porsche. Which is precisely what our customers will see, feel and sense when sitting in one of our cars. Second, Porsche will always stand for core competence in areas such as driving dynamics, design, and power units," Macht said.

    In Autocar


    Re: How Porsche will be integrated into VW and future plans

    Leblanc:

    "Two things are absolutely clear: First, a Porsche always remains a Porsche. Which is precisely what our customers will see, feel and sense when sitting in one of our cars. Second, Porsche will always stand for core competence in areas such as driving dynamics, design, and power units," Macht said.

    In Autocar

     


    --
    It's not where you're going, it's how you get there that counts

    Re: How Porsche will be integrated into VW and future plans

    If Piech leaves Porsche alone, it's business as usual. If Piech waters down Porsche (or changes its soul), current models will appreciate. :)


    --

    _________________________________________________________ 

    A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.


    Re: How Porsche will be integrated into VW and future plans

    It is very encouraging to see that so many of you are optimistic.

    I remain a little dubious.


    Re: How Porsche will be integrated into VW and future plans

    Porsche and Volkswagen Continue to Be Profitable

    Nov 26, 2009

    source: Audi AG

    This Wednesday (November 25) in Stuttgart, Porsche Automobil Holding SE presented its company figures for the business year 2008/09, which covered Porsche operations from August 1, 2008 to July 31, 2009 and Volkswagen business for the six-month period from January to June 2009. This is because Porsche SE increased its voting share in Volkswagen AG above 50 per cent on January 5, 2009, leading to a full consolidation.

    In his first official act as the new Chief Executive Officer of Porsche SE, Prof. Dr. Martin Winterkorn emphasized that both Porsche AG and Volkswagen AG continue to be profitable businesses, despite the difficulties in global markets. The company's operating results for the reporting year stood at 1.9 billion euros. Within this, Porsche AG recorded a profit margin of 10.3 per cent, and Volkswagen of 2.4 per cent.

    Hans Dieter Pötsch, who also spoke for the first time in his position as Chief Financial Officer of Porsche SE, explained in detail why the bottom line results for Porsche SE were negative. He highlighted the devaluation of the cash-settled stock options, in conjunction with their sale to the Emirate of Qatar and the effects of the purchase price allocation. The latter was necessary as a result of crossing the 50-per cent threshold of Volkswagen AG common shares and the full consolidation of the Wolfsburg-based car maker in the accounts of Porsche SE. As part of this, the actual cash values of the assets and debts acquired were calculated, which were then included in the Porsche SE figures. The company results before taxes for Porsche SE stood at minus 4.4 billion euros. The previous year's total was 8.6 billion euros.

    The full net profit according to German commercial regulations shall be paid out to shareholders. After the removal of one billion euros from the revenue reserves, this stands at 8.23 million euros. At the annual general meeting, which takes place on January 29, 2010 in the Porsche Arena Stuttgart, a dividend of 0.05 euros per preferential share, and 0.044 euros per common share, will be proposed.

    Michael Macht, Executive Board Member of Porsche SE and Chief Executive Officer of Porsche AG, presented the key figures of the Stuttgart-based manufacturer for the business year 2008/09. Revenue decreased by 12 per cent to 6.6 billion euros, while sales fell by 24 per cent to 75,238 vehicles. The reduced decline in revenue is a result of changes to the model mix. A larger proportion of total sales was accounted for by higher value 911 models, while the share of Boxster and Cayman models dropped. As such, the 911 range recorded sales of 27,070 vehicles (minus 14 per cent), the Cayenne sold 34,265 units (minus 25 per cent), and sales of the Boxster and Cayman combined stood at 13,140 vehicles. The principal reason for the 40 per cent reduction in sales of the mid-engined sports cars was the generational change of the range that took place in February 2009.

    With a total of 76,739 units, 27 per cent fewer vehicles were produced than the previous year. 27,776 examples of the 911 left the production line in Stuttgart Zuffenhausen, while the team at the original Porsche plant assembled 2,146 Boxster vehicles. Valmet in Finland produced 12,257 further units of the mid-engined Boxster sports car and Cayman. In Leipzig, 32,640 Cayenne models were manufactured, along with 1,920 units of the new Panamera.

    Despite the fall in vehicle sales, Porsche was able to create new jobs during the 2008/09 financial year, with the total number of positions rising by 450 to 12,652. These new posts were created in Leipzig and in the service organizations.

    As regards to the current business year 2009/10, the Porsche SE Executive Board, which alongside Prof. Dr. Martin Winterkorn and Michael Macht is made up of Hans Dieter Pötsch and Thomas Edig, is optimistic as to the development of the company. Over the course of 2010, Porsche AG expects a revival in sales. The automotive manufacturer can count on an attractive range of products, including the new Panamera, in particular.

    Similarly, with its nine brands and young model portfolio, Volkswagen AG is also well positioned to overcome the challenging market situation. Volkswagen will also continue to outperform the overall market.

    STATEMENT BY DR. MARTIN WINTERKORN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF PORSCHE AUTOMOBIL HOLDING SE

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    Ladies and Gentlemen,
    Welcome to Zuffenhausen, to the Financial Press Conference of Porsche Automobil Holding SE. I am pleased to welcome you for the first time in my new function as Chief Executive Officer of the Company.

    Last Friday the Supervisory Boards of Volkswagen AG and Porsche SE approved the Implementation Contracts on the Basic Agreement signed by both Companies. This brings us a decisive step closer to our objective to merge Volkswagen and Porsche into a strong, integrated Automotive Group under the leadership of Volkswagen. The resolutions taken by the Supervisory Boards also provide the foundation for Mr. Pötsch and I myself officially taking on our offices on the Executive Board of Porsche Automobil Holding SE.

    The newly formed Executive Board of Porsche SE you see here today on the podium shows very clearly that Volkswagen and Porsche are now moving into the future together and that we are all looking forward at shaping our successful future in an active and dynamic process. Today we are here together to offer you information and answer your questions on the fiscal year 2008/09 of Porsche SE.

    The details on the financial statement and the current financial situation will be presented by Mr. Pötsch. Then Mr. Macht will inform you of the business development of Porsche AG as a member of the Group.

    Ladies and Gentlemen,
    Today we are looking back at a certainly turbulent business year 2008/09. It is however also a fact that the recent months have been very turbulent and full of change not just for Porsche SE, but rather for the entire automotive industry as such. Due to the
    substantial upheaval and disorder in the international financial markets, the world economy slipped into an unprecedented recession in the second half of 2008. This had – and still has – a particularly hard impact on the automotive industry.

    While overall demand in Germany and China has picked up again significantly this year – not least on account of state support schemes and initiatives – the market volume in major sales regions such as North America is still down more than one-third. In formerly booming growth markets such as Russia, demand has even collapsed by more than a half.

    Germany is the world’s leading automotive country and the German automotive industry is the driving force behind our exports, just as the automotive industry leads the German economy as a whole. Precisely this is why we are particularly hard hit by the global sales crisis. Also because German car makers, more than any others, stand for premium products.

    This particular strength in the upmarket range and in the sports car segment has indeed set the foundation for decades for our leading position against global competition. So it is only obvious that the decline and even the slump in demand we have seen in these segments hurts us even more.

    I am nevertheless absolutely convinced that the German automotive industry in particular will come out of the crisis stronger than ever before. The reason, quite simply, is that exclusivity, sporting performance and responsible premium standards all have a great future.

    Premium cars “Made in Germany” are and remain very popular the world over. In the USA, in Europe, and particularly in emerging markets such as China or India. Innovative technologies, excellent product quality and strong brands – precisely these strength have taken us up to the top of our competitive market. And precisely these strength set the foundation for a successful future.

    It also is a fact, however, that new technologies and innovations in the automotive industry always require an enormous financial effort and commitment. Clearly, one single Company – particularly a relatively small Company – is not able to shoulder such efforts that easily. Particularly with cost pressure and competition becoming tougher all the time. Precisely this is why we see an increasing number of alliances and joint ventures in our industry. Synergies in development, purchasing and production create significant cost benefits and are therefore crucial to the competitive edge we need in the market.

    Porsche realised this at an early point in time. Precisely this is why Porsche and Volkswagen agreed in the late ’90s to develop their own joint SUV platform – the platform used for the Porsche Cayenne, the Volkswagen Touareg, and the Audi Q7. The two Companies also cooperate closely and efficiently in the production of these models and the new Panamera. This partnership has proved its value time and again over the years. And now we have the unique opportunity to intensify this partnership again most substantially.

    The integration of Volkswagen and Porsche therefore follows a convincing industrial logic. Here we see two of the most powerful companies in the international automotive industry coming together. We will pool and bundle our resources. We will capitalise on
    growth potentials, creating synergies and significantly reducing our costs in the process.

    Both the Volkswagen Group with the nine brands we have today as well as Porsche as a manufacturer of sports cars will benefit from this synergy. Together we will not only cover all major car segments in future, but will also significantly enhance our innovative power to an even higher standard.

    Our benchmark – no more and no less – is to be the driving force for innovation throughout the entire automotive industry. Within our Integrated Automotive Group the discerning customer will find the strongest brands, the best technologies, and the most emotional products in the upmarket range. We will indeed further enhance and extend this leading position in the premium segment step-by-step.

    The merger of Volkswagen and Porsche makes all the parties involved genuine winners:
    • Customers and employees.
    • Business partners and shareholders.
    • And, not least, Germany as a centre of industry and Baden-Württemberg as a leader in car production.

    The teams at Porsche and Volkswagen are among the best in the automotive world. The employees of both Companies will benefit significantly from this integration. Not least, because their jobs will become even more fit for the future, even safer than before. Within the Integrated Automotive Group Porsche will have all the freedom it needs to continue its business with exclusive sporting cars even more successfully than before.

    Indeed, Porsche must and will remain a strong and independent brand. Here, therefore, we are following the competence and professional standard of the Volkswagen Group’s multi-brand strategy in every respect:
    • Porsche will thrill its customers also in future with fascinating models.
    • Porsche will introduce new models into the market, growing worldwide and continuing to make a good profit.
    • And Porsche will set the standard in technological terms as an independent brand within a strong and powerful Group of Companies.

    Ladies and Gentlemen,
    the path we have taken so far in growing together was not simple. So let me state very clearly that this period is now behind us – today it is history. The waves have died down and we are all moving in the same direction, pursuing the same strategy. In this process we have a clear objective and focus in mind: to merge Volkswagen and Porsche into a powerful, Integrated Automotive Group. The foundation we need to do this has already been set by our Basic Agreement and the signing of the Implementation Contracts.

    The crucial point is now to continue stabilising the financial position of Porsche SE. With the agreed transaction structure the Porsche SE will be in a robust financial situation. In this context, we are pleased that Porsche has now a new large shareholder.

    The Emirate of Qatar has purchased mid-August, 10 percent of the shares of Porsche SE. In addition, the Qatar Holding has acquired a substantial part of the cash-settled stock options for Volkswagen shares. The next important step on the way to an Integrated Automotive Group will be a capital increase at Porsche SE in 2011. This capital measure will be endorsed to a large extend by the shareholder families Porsche and Piech. As a result, Porsche SE would be dept-free and set financially strong. And that is the basic requirement for the merger with Volkswagen in the term of 2011. You see, Ladies and Gentlemen, that we still have quite a long way to go. And we realise that we will still have to clear up some obstacles on the way. This process of integration calls for discipline, open cooperation and hard, concentrated work by all of us.

    However, my colleagues on the Board and I are very confident that we will be able to successfully complete this process of integration within the time-frame established. We realise that in this process we will continue to face difficult challenges in the world around us. The overall economic scenario, for example, remains everything but good. True, there are some indications at the moment that the economy is slowly building up momentum. But the recession in our industry is still far from over. The year 2010 will be a very hard year for car makers. Porsche must also expect some difficult months still to come.

    Over and above these economic challenges, our industry is also facing a technological challenge. We must and will reduce both fuel consumption and CO2 emissions once again by a substantial margin. The European Union has already resolved a wideranging set of regulations with very ambitious targets for greater fuel economy and lower CO2 emissions – and we also see the introduction of increasingly strict rules and regulations on CO2 emissions in core markets such as the USA and China.

    Both Porsche and Volkswagen live up to their responsibility in protecting the climate and ensuring sustainable mobility without making any concessions. The two companies have been working together very successfully for many years on the constant improvement of fuel economy and emission management. Milestones in this respect next year will definitely be the new Touareg and the new Cayenne with hybrid drive, which we have developed together.

    We must however all realise that protection of the environment and our climate does not come for nothing. On the contrary – this requires investments of billions of Euros in existing and alternative technologies. And it is obvious that making such investments particularly today, right in the middle of the automotive crisis, requires a huge effort.

    Pooling our resources within the Integrated Automotive Group will however help us in this process, strengthening and enhancing our economic and technological performance. I am deeply convinced that with its various brands our Integrated Automotive Group will be the fittest car maker for the future throughout the entire automotive industry. Just take a look at our current model range to see what I mean.

    As a Swabian who has admired Porsche since childhood I have utmost respect for the outstanding achievements of the team here at Porsche:
    • Porsche is one of the most valuable brands.
    • Porsche is the iconic sports car.
    • And Porsche is the dream of millions of car enthusiasts the world over.
    All of this, Ladies and Gentlemen, is and remains the benchmark for our activities. And
    now, in the Integrated Automotive Group with Volkswagen, the Porsche brand has
    better chances than ever before to continue its story of success.

    We are focusing together most clearly on our long-term objective: To achieve and hold the top position in the international automotive industry.

    STATEMENT BY MICHAEL MACHT, CHIEF EXECUTIVE OFFICER OF PORSCHE AG AND EXECUTIVE BOARD MEMBER OF PORSCHE AUTOMOBIL HOLDING SE

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    Ladies and Gentlemen,
    After Professor Winterkorn and Mr. Pötsch have now made you acquainted with the Annual Accounts of Porsche Automobil Holding SE for the former business year 2008/09, I would like to inform you in the following on the development of Porsche AG as a subgroup.

    To make it quite clear from the beginning, Porsche’s operative business in the reporting period was characterised largely by the very difficult overall economic situation. The dramatic slump in global demand for passenger cars, particularly in the upper premium segments, had a very significant effect also on our Company, with the number of cars sold by Porsche AG in the reporting period amounting to 75,238 units, down by 23.7 per cent from the previous year’s figure.

    By contrast, revenues were down by 12.1 per cent to 6.6 billion euros, clearly reflecting the improvement of our product mix over the previous year: While demand for the highpriced top models in the 911 and Cayenne series dropped only moderately, the Boxster/Cayman series – attributable, not least, to the changeover to the new generation in February 2009 – was hit hardest by the sales crisis.

    In the reporting period sales of our mid-engined sports cars amounted to just 13,140 units, 40 per cent below the previous year’s figure. Sales of the Cayenne dropped by 25 per cent to 34,265 units, despite the introduction of the diesel model in February already accounting for a significant 5,796 units sold.

    The Cayenne model series nevertheless still makes the biggest contribution to our overall sales, followed by the 911 accounting for total sales of 27,070 units, down by only 14 per cent from the previous year.

    The North American market proved to be particularly challenging, with Porsche delivering only 19,024 units to customers in the business year, following 31,818 customer deliveries in the previous year.

    Customer deliveries in Russia and Japan also show a significant decline, while our
    home market has developed relatively well: Accounting for 12,506 new cars delivered
    to customers, Porsche Germany was down only about 1,000 units from the previous
    year. This means we have succeeded in increasing our market shares, in some cases
    very significantly, in premium segments subject overall to a substantial drop in volume,
    that is precisely the segments in which our cars are positioned.

    The Chinese market remains very good news for the Company: Although economic growth and dynamism has weakened noticeably also in China, we were able in the year under report to deliver no less than 7,708 new cars to customers in the Chinese market – well over 100 cars more than in the previous year.

    Customer deliveries in the Middle East and Brazil likewise remain at almost the same level as last year, showing that we are very well positioned in our most significant markets of the future.

    Ladies and Gentlemen,
    The recession, starting at the beginning of the business year, showed from the outset that on 31 July 2009 Porsche sales and revenues would remain far behind the all-time highs reported in the previous year. Even so, it was not yet to be anticipated in summer 2008 that the distortions in the international financial markets would lead to a global economic crisis of this magnitude. We, also, were therefore surprised by the sheer impact of the crisis on vehicle markets the world over. And the premium market
    segments in which Porsche is active were hit particularly hard by this dramatic decrease in demand.

    Porsche nevertheless responded very quickly to the new situation in the market, taking appropriate steps in good time to counteract these challenges. Thanks to our very flexible production system we have succeeded in consistently adjusting production figures to the negative development of demand, building only 76,739 units throughout the entire year under report – 27 per cent less than in the previous year. This means that we have consistently avoided building cars simply for stock. A further point is that we have implemented a consistent scheme for the reduction of costs in all areas of the Company, allowing us to work profitably and make the necessary capital expenditure from our own resources.

    Even in times as difficult as these, our car business still shows a high level of profitability quite unparalleled in the international automotive industry. Our operative return on sales, therefore, remains in the double-digit percentage range, proving that it was the right policy to consistently optimise our processes also in good times, improving our cost structures and enhancing our efficiency accordingly. As a result, we were well-prepared for the current recession.

    Entering the new fiscal year we nevertheless had no choice but to reduce the number of working days in this calendar year by a total of 18 at our Main Factory in Zuffenhausen. As a result of the adjustment in production so far, the flexible working time accounts of our employees in production are already exhausted – and we were simply not willing and able to ask our employees to accumulate an even larger number of working hours lost.

    The next regrettable point is that this negative trend has continued in the first three months of the current business year, sales decreasing once again versus the first quarter of fiscal 2008/2009. Good news, however, is that customer deliveries have developed positively in the course of this month, making us very satisfied with sales figures in the first three weeks of November.

    Given this positive development, I am confident that when presenting our interim report for the first four months of the current fiscal year in mid-December, we will see that the decrease in sales is significantly more moderate than in the overall 2008/09 business year.

    This shows that demand for Porsche cars seems to be picking up again slowly but surely. Indeed, there are also signs that this positive trend will continue in the next few months, meaning that we would indeed by able to make a turnaround. And once the
    economy is moving forward again properly on a lasting and sustained basis, Porsche sales will pick up once again – this, I believe, is beyond any doubt.

    So while the next few months will remain very difficult in our business, I am cautiously optimistic about the next calendar year, although I realise there are many imponderables which might still slow down a consistent upswing of the economy.

    Be it as it may, Porsche is excellently prepared for the future. Our current product portfolio is the most attractive and versatile we have ever had in the history of the Company. And since mid-September we have had our fourth model series, the fourseater Gran Turismo Panamera, in our range, enabling us to once again significantly broaden our customer base.

    In all markets where it has been introduced so far the Panamera has received a very positive response, with sales starting on a very promising note.

    We are also fully up-to-date in technological terms: When it comes to fuel consumption and emissions, Porsche’s current power units live up to the competition in their respective classes in every respect. In addition, we have new technologies such as the Porsche-Doppelkupplungsgetriebe (Double-Clutch Gearbox) in conjunction with the automatic start/stop function serving to reduce fuel consumption even further.

    Not without reason, Porsche again won the “Best New Engine Award” in 2009, a very special prize bestowed by the British technical journal Engine Technology International. This year the award went to the 3.8-litre power unit of the 911 Carrera S. Despite their increase in output by 8.5 per cent over the former model generation, the current models with Double-Clutch Gearbox consume 13 per cent less fuel. And at the same time CO2 emissions are down by almost 15 per cent.

    Another example is the 400-horsepower Panamera S with our Double-Clutch Gearbox , which consumes just 10.8 litres on 100 kilometres, equal to 26.2 mpg imp. And the Cayenne Diesel in the market since February of this year, incidentally featuring an engine supplied by Audi, makes do with only 9.3 litres, equal to 30.4 mpg imp. The future Cayenne Hybrid we will be launching in 2010 will reduce fuel consumption even further to less than nine litres on 100 kilometres, and we also plan a hybrid version of the Panamera.

    The outstanding quality of our vehicles is also acknowledged worldwide. Following
    Lexus, to mention just one example, Porsche finished second in the recent Initial
    Quality Study (IQS) conducted by the US market research institute J.D. Power, making
    us the best European car maker in this global ranking.

    Achieving this excellent result, our brand has scored a top position in the J.D. Power quality study for the fourth time in a row this year. Obviously, this is the result of our consistent focus on quality and equally consistent customer orientation in development, production, and sales.

    We also achieved an outstanding result once again this year in J.D. Power’s APEAL Study, with Porsche being chosen as the most attractive and popular brand by US customers for the fifth time in succession. In the individual rankings, the 911 Carrera was No. 1 in the Premium Sporty Segment and the Cayenne came right at the top in the Midsize Premium Multi-Activity Vehicle Segment.

    Ladies and Gentlemen,
    With attractive, sporting cars, lean structures and efficient processes, as well as a high standard of innovation and flexibility, Porsche is perfectly prepared for the challenges of the future. And now we will face up to all these challenges within the Integrated Automotive Group we seek to establish together with Volkswagen. Our two companies are moving consistently towards our common objective. I am therefore very confident that the merger of Porsche and Volkswagen in a step-by-step process will be concluded as planned in the year 2011.

    Forming a team with the existing nine brands of Volkswagen AG, this will give Porsche new perspectives, potentials and opportunities under the roof of the new Group – and it goes without saying that we plan to capitalise consistently on these opportunities, as we have already done to a certain extent in the past.

    A good example in this context is our cooperation in the Colorado Project, which ultimately led to the Porsche Cayenne, the VW Touareg, and the Audi Q7. The Cayenne Diesel featuring a high-performance diesel engine from Audi also shows what is possible in this respect.

    In future we will cooperate even more closely not only in development, but also in purchasing and production. One example is that the body of the Cayenne and the Panamera already come from VW plants. This gives both sides big advantages, Porsche helping to capitalise on the use of Volkswagen’s existing production capacities. At the same time it saves us the need to build our own Bodyshop and Paintshop in Leipzig, which would mean significant fixed costs on a long-term, lasting basis. So all this follows a clear industrial logic benefiting both Porsche and Volkswagen in the same way.

    In future we plan to continue consistently along these lines by moving even closer together under our common roof within the Group, interacting even more closely, and capitalising on the potentials we have in this way.

    Two things are absolutely clear:
    First, a Porsche always remains a Porsche. Which is precisely what our customers will see, feel and sense when sitting in one of our cars.

    Second, Porsche will always stand for core competence in areas such as driving dynamics, design, and power units.

    I am firmly convinced, Ladies and Gentlemen, that Porsche will continue to develop very positively and grow profitably as an independent premium brand within the new, Integrated Automotive Group.

    With this in mind, annual sales of 150,000 units are by all means a realistic figure in the long term. To reach this volume we will of course consider new models and model series sensibly supplementing or existing model range and fitting appropriately into our brand world. For we will not be able to reach this sales volume with our existing four model series alone.

    Precisely this outlook shows the potentials we have at Porsche within the new, Integrated Automotive Group. Cooperating closely with the other Group brands, we will be able in future to implement ideas and concepts which Porsche by itself could never make reality. So just wait for some interesting surprises, Ladies and Gentlemen! All this proves that Porsche has an enormous potential for the future. And now we wish to capitalise on this potential together with Volkswagen under our new common roof – to the benefit of both Companies and to the advantage of our customers, employees, and shareholders. So you may rest assured that from the very beginning Porsche will make an important contribution in making the Integrated Automotive Group we seek to establish as of 2011 an impressive story of success.

    We at Porsche are now looking at the desired merger with Volkswagen in the course of the year 2011 with great confidence. We have indeed already taken the first important steps on the way in reaching this target.

    The next big step is the stake of Volkswagen AG in the amount of 49.9 per cent in Porsche AG. The purchase price of 3.9 billion euros, which will be paid for this share, based of the identified Porsche AG total enterprise value of 12.4 billion euros.

    From this enterprise value, however, are financial liabilities, claims and adjustments amounting to 4.65 billion euros to be deducted, so that there is finally an equity value of 7.75 billion euros. This value represents the benchmark for the value of the capital investment of 3.9 billion euros, which the Volkswagen AG provides for the participation of 49.9 percent of Porsche AG.

    To prepare this step we have established Porsche Zwischenholding GmbH, an Interim Holding Company, as a wholly-owned subsidiary of Porsche Automobil Holding SE. Today’s Porsche AG will be merged into this Interim Holding. Immediately after this merger, the Interim Holding will transfer the operative business acquired in this manner from Porsche AG to the likewise newly established Porsche Fünfte Vermögensverwaltung AG referred to in brief as “New Porsche AG” by hiving out the operative business.

    New Porsche AG will start out as a wholly-owned subsidiary of the current Porsche AG and will remain connected to Porsche AG through a Domination and Profit Transfer Agreement. Following the merger and hive-out, New Porsche AG will be a whollyowned subsidiary of Porsche Zwischenholding GmbH. This will also mark the end of the existing Domination and Profit Transfer Agreement between the current Porsche AG and Porsche Automobil Holding SE.

    Volkswagen AG will then acquire a share in Porsche Zwischenholding GmbH by way of an increase in stock capital. The share of Porsche Automobil Holding SE in Volkswagen AG of approximately 51 per cent will remain in place irrespective of this transaction, until the planned merger of Porsche SE and Volkswagen AG is completed in 2011.

    This shows that the path we still have to take before establishing the new Integrated Automotive Group is relatively long. But I am absolutely convinced that we will reach our objective at the latest in two years.

    With this in mind, we now look into the future full of confidence and good hope.

    STATEMENT BY HANS DIETER POTSCH, CHIEF FINANCIAL OFFICER OF PORSCHE AUTOMOBIL HOLDING SE

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    Ladies and Gentlemen,
    A warm welcome from me, too, to our press briefing on the annual results of Porsche SE here today in Zuffenhausen.

    This consolidated financial statement of Porsche SE is not in the same category as those with which we are familiar from prior years. Until one year ago Porsche presented an annual report that reported first and foremost on the business generated with Porsche passenger vehicles, and – since September 2005 – also reflected the equity investment in Volkswagen, the consolidated financial statements for the year 2008/09 contain both the Porsche business and, on a pro rata basis, six months of the Volkswagen business. In addition, the options entered into and the impact of the purchase price allocation for the investment in Volkswagen had a significant influence on the figures we are reporting today. For this reason, this year’s annual report is not easy to understand and I will attempt to give some assistance with the interpretation of the financial statements.

    The consolidated financial statement of Porsche SE as of 31 July 2009 contains three peculiarities: firstly, the key figures that I will present to you here today cannot be compared to the prior years. The main reason for this is the full consolidation of Volkswagen AG, after the share in the voting rights held by Porsche SE rose above the 50 percent mark on 5 January 2009, and the subsequent purchase price allocation.

    Secondly, the results of Porsche SE are distorted by the write-down on the options for Volkswagen shares in fiscal year 2008/2009, a measure that was taken in preparation for selling them. Thirdly, these financial statements only offer a limited view of the underlying value of those segments that are the main drivers at Porsche SE – the Porsche AG group and the Volkswagen group.

    I would like to elaborate on these issues at more depth and explain the most important aspects.

    I would like to begin with a presentation of the segments, which we have supplemented with additional information. From the reported sales revenues of 57.1 billion euros, 6.6 billion euros was generated by Porsche AG and 50.5 billion euros by the Volkswagen group. Earnings before interest of 3.7 billion euros break down into a loss of 1.8 billion euros suffered by the Porsche group, excluding Volkswagen, primarily due to the revaluation of stock options mentioned above, and a loss of 1.9 billion euros through Volkswagen that is chiefly due to rolling forward the hidden reserves identified in the course of the purchase price allocation. Despite these results, both companies have a very sound core business. Taken together, the results of operations generated by the two groups amount to 1.9 billion euros, in other words a very healthy profit. This sum comprises 0.7 billion euros at Porsche AG and 1.2 billion euros at Volkswagen.

    Expressed in relative terms, Porsche AG reports a return on sales of 10.3 percent and Volkswagen a return on sales of 2.4 percent. As a result, the operating business of Porsche and Volkswagen are both profitable in spite of the impact of the global economic crisis on unit sales, revenue and earnings. The net cash flow of both operating units continued to be positive.

    The fact that the bottom line of Porsche SE was negative in the final instance is due to the impairment losses from writing down options and the impact of the purchase price allocation. It is important to remember that these losses are of a non-cash nature. In other words, they are purely paper losses.

    The impact of the options can be calculated as follows: prior to their revaluation the net result from marking to market the cash settled options for shares in Volkswagen AG resulted in a net gain of 7.8 billion euros. However, the loss incurred from marking these stock options to market on balance sheet date totaled 10.3 billion euros. In this regard, the best indicator of market value for the options was taken to be the sales price for the options, and in this case that amounted to the conditions at which the Emirate of Qatar was interested in buying the options. In sum, this resulted in a loss of 2.5 billion euros in fiscal year 2008/09 even though the options themselves were not sold until the new year 2009/10.

    In the course of the purchase price allocation, all the assets and liabilities of Volkswagen were recognized at their respective fair values as of 5 January 2009, the date on which they were consolidated in full for the first time. Porsche had to roll forward the resulting differences to the values at which these assets and liabilities are recognized in Volkswagen’s accounts over the following months. For example, the hidden reserves identified in fixed assets placed an additional burden on the Porsche Group due to the increase in the depreciation expense. All in all, rolling forward the hidden reserves and liabilities identified in the purchase price allocation reduced earnings by around 3.1 billion euros. Of this amount, 1.8 billion euros is due to the purchase price allocation in the narrow sense, 0.6 billion euros to the sale of the Brazilian commercial vehicle business of Volkswagen to MAN AG, and 0.7 billion euros to hedging transactions included in the equity of Volkswagen. Naturally, the profits from selling the commercial vehicles operation and closing the hedging transactions, both of which were realized by Volkswagen at a later date, had to be eliminated from the accounts.

    Ladies and Gentlemen,
    Over the last few months there has been considerable speculation about the debt situation, and specifically the net debt, of Porsche SE. Let me provide you with a few comments to clarify this point:

    The net liquidity of Porsche, which is defined as gross liquidity less financial liabilities, and after excluding the financial services business and eliminating the effects from Volkswagen, dropped from minus 3.1 billion euros in the prior year to minus 11.4 billion euros on 31 July 2009. This decrease in net liquidity was due above all to the decrease in cash and cash equivalents and the portfolio of securities.

    The cash paid for the acquisition of subsidiaries less the cash acquired amounted to 6.4 billion euros. On top of that, the obligations entered into prior to the balance sheet date to repurchase portions of the hybrid capital that had been issued in the fiscal year 2007/08 led to a cash outflow of 0.5 billion euros. In this respect, Porsche made use of very attractive conditions to repay a portion of the hybrid bond issued as part of a private placement.

    In the past week, a Basic Agreement was reached with the banks to dissolve the credit line agreed on in March 2009 of approximately 10.8 billion euros. This is an important step towards reducing the level of debt at Porsche SE. The funds of approximately 3.9 billion euros originating from the cash contribution by Volkswagen for a 49.9 percent shareholding in Porsche AG are being used to reduce debt. This contribution was made to pave the way towards the creation of an Integrated Automotive Group. The new line of credit involves a volume of up to 8.5 billion euros, divided up into three tranches with terms lasting until 2012. In this way, we have secured the financial stability needed by Porsche for the entire duration of the planned merger with Volkswagen and beyond at market interest rates and thus at manageable costs.

    All banks involved in the previous major loan are without exception proceeding with the new credit line with no change to their proportionate share in the loan. I consider this as a clear signal of the confidence placed in us by all our banking partners. I find this to be important in light of the audit opinion issued by the auditor in Porsche SE’s annual report. The auditor added a comment to the audit opinion referring to the statements in the Group Management report on the liquidity position of Porsche SE. Since Porsche SE’s debt have been put in place, this has been given notice of the auditors duly into account. The supervisory board decisions passed over the last week and the commitment on the part of the banks safeguards the liquidity of Porsche SE.

    Ladies and Gentlemen,
    One of the main prerequisites for the supervisory boards of Porsche and Volkswagen to approve the Basic Agreement and the related implementing agreements was to safeguard Porsche’s financing. In this respect – as was mentioned a few minutes ago – we are on the right path. We are fulfilling the prerequisites one by one for the merger of Volkswagen AG and Porsche SE that is scheduled to take place in the course of 2011.

    From Porsche’s perspective, the main elements of the transaction, following the prospective merger, will include the already mentioned Volkswagen stake of 49.9 percent in Porsche AG by means of a capital increase totaling some 3.9 billion euros and a capital increase in Porsche SE in 2011 by issuing new ordinary and preference shares of a total of 2.5 billion euros each. To take into account the rather unlikely possibility that the merger does not take place after all, the parties concerned have incorporated a put/call structure into the transaction concept that provides for the remaining 50.1 percent of Porsche AG, calculated on the basis of the value of the company, to be transferred to Volkswagen by no later than 2014.

    One of the reasons for our confidence is the sustained profitability of Porsche and Volkswagen’s operations activities, a fact that obviously has not been shaken by the adversities to which we are exposed on the international sales markets. On the contrary: Porsche expects its sales to recover in the course of 2010. The company is basing this forecast on its attractive product portfolio, the new Panamera model in particular. With its nine brands and young model range, Volkswagen is well prepared for the difficult conditions prevailing on the sales markets. Volkswagen will continue to perform better than the overall market.

    With regard to segmentation and development of earnings in the Porsche SE group’s 2009/10 fiscal year, I would like to point out the importance of the amendment to the articles of association regarding the right of the State of Lower Saxony to appoint two members of the Supervisory Board scheduled to be passed by Volkswagen’s Annual General Meeting. Approval of the proposal by the Annual General Meeting would mean that Porsche would lose its control of Volkswagen and it would no longer be possible for Volkswagen to be consolidated in the consolidated financial statements of Porsche SE. According to the International Financial Reporting Standards, the deconsolidation necessary in this event would mean that the shareholding in Volkswagen would have to be reported at the market value. This would give rise to a considerable loss on the basis of the current market price. Such loss would be offset by the opposite effect arising from the deconsolidation of Porsche AG. The 49.9 percent shareholding in Porsche AG planned by Volkswagen AG means that Porsche SE will lose its sole control of Porsche AG. According to the information currently available, these structural changes to Porsche SE’s consolidated financial statements would lead to a loss in the range of a figure in the low single-digit billion Euro range.

    Ladies and Gentlemen,
    Before I come to the end of my speech, I would like to provide you with an outlook to the upcoming annual general meeting of Porsche SE. At its annual general meeting on 29 January 2010 to be held in Stuttgart, Porsche SE will propose distributing a dividend of 0.05 euros per preference share and one of 0.044 euros per ordinary share to be taken from the retained earnings of Porsche SE totaling 8.2 billion euros – following drawings of one billion euros from the revenue reserve.


    --
    Dedi La vita è troppo corta per non guidare italiano.....


    Re: How Porsche will be integrated into VW and future plans

    Enough there for a week end ^^

    Interesting that 2,146 Boxsters are true german cars while the rest are finnish boxsters. I wonder what determines if your boxster gets made in Germany or Valmet.

     

    The Cayenne is keeping Porsche alive and healthy.


     
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