Porsche, which makes among the world’s most legendary and well-regarded sports cars, will take a $21 billion hit because of its ownership of Volkswagen. Porsche is VW’s largest shareholder. It owns 32% of VW’s stock and has 53% of its voting rights.
24/7 Wall St. Key Points:
- Porsche will take a $21 billion hit because of its ownership of Volkswagen.
- Porsche blamed the market environment and its increasing uncertainties.
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Porsche said the decision was triggered by a “market environment with further increasing uncertainties, lower demand than originally expected on various markets and increasing geopolitical tensions and protectionist tendencies.” VW’s financial situation has become more troubled and unstable recently.
Among the signs of VW’s instability, Volkswagen Group of America’s CEO Pablo Di Si resigned last month.
VW is in a battle with its unions in Germany. It wants to close three plants there and fire what is expected to be tens of thousands of workers. It has never closed a plant in its home market. Car unions are more powerful in Germany than in the United States and will pressure management to lower prices in other parts of its operations.
VW’s challenges in Europe include the fact that it has competition, which has allowed it to undercut its prices. Union strikes could slow or halt production, worsening VW’s short-term financial prospects.
VW has also come up against the problems large legacy car companies have with electric vehicles (EVs). Tesla and China-based EVs have done well. Global giants such as Toyota, GM, and Ford have not. EV sales have also dropped in Germany this year.
Porsche may be the world’s ultraluxury car leader, but the trouble at a mass market car company is its largest problem.
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