Porsche officially takes over Volkswagen

Porsche, manufacturer of luxurious sports cars was grabbing chunks of Volkswagen, slowly but surely. This niche and small, but highly profitable maker of sports cars was swallowing a $150 billion company, almost 14 times its size.

History of VW and Porsche have a common origin, when first Volkswagen was created by the engineer Austrian Ferdinand Porsche, who later founded Porsche AG (German sports car manufacturing unit) in 1931. Infact first Porsche, the Porsche 64 of 1938, used many components from the Volkswagen Beetle. So this is one of its kinds of reunion of families.
Supervisory board of Volkswagen Group approved a request by Porsche to obtain 51-percent of the company for some $15.73 billion, which would give it a majority stake in the people's automaker, earlier this year. Furthering effort of Porsche, E.U. commission on Wednesday granted permission for the sports car manufacturer to gain control of Volkswagen as result Porsche now owns a 51% stake in Europe's largest and world’s fourth largest automaker.
In the process, European Court of Justice in Luxemburg scraps Volkswagen law, (a statute devised by the German government in 1960 to protect the position of the state of Lower Saxony, which owns 20.1 percent of Volkswagen’s shares, and views itself as a protector of the workers’ rights) limits an individual shareholder's percentage of voting rights to 20 percent regardless of the stake. But law faced a struck down after the opinion of its advocate general, Dámaso Ruiz-Jarabo Colomer, a legal counsel to the court, who declared last February that the Volkswagen Law infringed on the free flow of capital within Europe.

VW takeover is a brainchild of Porsche’s chief executive, Wendelin Wiedeking and now after the takeover he wants Volkswagen to vie with Toyota of Japan to be the world’s leading mass-market manufacturer. He cleared his intentions to have little tolerance for pouring resources into an unprofitable luxury car like Phaeton, especially since the Volkswagen-Porsche group already has several other premium brands: Porsche, Audi, and Bentley. Under the strong leadership of Mr. Wiedeking’s, Porsche has improved from near-bankruptcy to reaping the highest profit margins of any carmaker.

Committed towards takeover, Porsche had changed its legal status from a German to a European company, fuelling suspicions that it was trying to skirt strict German worker protection laws and now Porsche had already signed a deal with its 12,000 workers, giving them and the Volkswagen work force each three seats on the 12-member holding company board, though Volkswagen’s worker representatives have filed a lawsuit challenging the makeup of the board.

Also its assumed Porsche's plan was to lump its products along with the more fuel efficient models from VW, which could allow the company to avoid paying large fines for not meeting carbon output regulations.
By gobbling up Volkswagen, Porsche could dial back on these fuel-saving models and get back to its high performance ways without fear of excessive penalties.

Management capabilities of Porsche is very good at running a niche car company but running a small company is entirely a different business than running one of the world’s largest car companies, so everyone must hold their breadth and watch out the future developments.