The board of the giant German carmaker Volkswagen agreed Thursday to forge a new global automotive powerhouse by mounting a two-step 8-billion-euro ($11.4 billion) takeover of the legendary sports vehicle group Porsche.
VW is preparing to absorb Porsche to create an auto powerhouse
Announcing the agreement, Volkswagen chief Martin Winterkorn said the way was now free for the creation of an integrated VW-Porsche group with the sports carmaker to remain an independent brand.
The new combined VW-Porsche group would be "a major force" in the world car business, he said.
However, Porsche owners, executives and union leaders vowed that the company would remain independent after CEO Wendelin Wiedeking stepped down and Porsche seemed destined to be taken over by VW.
"Trust me... the Porsche myth is alive and will never founder," billionaire shareholder Wolfgang Porsche told 5,000 workers with a trembling voice during a boisterous rally in Stuttgart, southwestern Germany.
"The families are in complete agreement on the fact that Porsche's success is founded on the brand's independence," he added.
Porsche officials adamant over independence
Wiedeking resigned to end a bitter power struggle at Porsche
Wiedeking and finance director Holger Haerter, who has also resigned, "fought like lions for their concept," Porsche said, referring to the former CEO's measures aimed at reducing Porsche's debt of around 10 billion euros and ensuring its independence within an integrated VW group.
The company can now "negotiate with VW on equal terms," Porsche added.
Wiedeking, who was hailed by the crowd, told workers that "the fundamental decisions are good ones."
He got strong backing from works committee chief Uwe Hueck, who said the Porsche chief had been "publicly executed" in press reports.
An agreement would lead to a merger of the two companies, but "there will be no merger of Porsche AG," the group's core auto-making unit, Hueck said, adding in often strident tones that "Porsche is still independent."
If and when Volkswagen succeeds in creating an integrated auto group with Porsche, it won't only reinforce its position as Europe's biggest automaker but would also put the Wolfsburg-based company a small step closer in terms of vehicle sales with world number one, Japanese giant Toyota.
VW has Toyota in its sights as world no.1
The sky could be the limit for the new Volkswagen
VW wants to overtake Toyota by 2018 and could pass US behemoth General Motors this year to become number two worldwide as GM emerges from bankruptcy and slims down in an effort to survive.
All told, VW and Porsche sold 6.4 million vehicles last year, generating combined revenues of more than 120 billion euros.
They are nonetheless still well behind their target, with Toyota selling more than eight million vehicles in its 2007/2008 fiscal year, up from 7.6 million in 2008/2009.
Although Porsche may help VW's profits, in terms of the absolute number of cars sold, fewer than 100,000 of their expensive vehicles rolled off forecourts around the world last year.
VW, by comparison, makes more affordable cars for the masses, selling more than six million vehicles in 2008.
The group's brands range from Swedish heavy truck maker Scania to superfast sports car manufacturers including Bugatti and Lamborghini which sit alongside the luxury Bentley and high-end Audi ranges.
Most VW sales, however, come from its bread and butter Golf and Polo models, together with Czech maker Skoda and Seat of Spain.
Porsche and VW employ almost 378,000 workers, including 12,800 at Porsche, with almost half the total in Germany.
VW reveals Qatar deal will go ahead
The VW supervisory board also announced that the Gulf state of Qatar is to buy a 17 percent stake in Volkswagen. This confirms a statement made by Christian Wulff, regional premier of the German state of Lower Saxony, which owns 20 percent of the biggest European carmaker.
"We are going on the principle that Qatar will take 17 percent of Volkswagen AG," Wulff said, after attending the extraordinary meeting in Stuttgart.
Editor: Susan Houlton