Porsche Says Request for State Aid Rejected

June 30, 2009
Automaker says it will not renew its aid application but will discuss alternative financing options.

Porsche suffered a fresh blow Tuesday as Germany rejected a request for a multibillion-euro state loan to relieve financial pressure created by the company's failed attempt to take over Volkswagen. The request for a 1.75-billion-euro (US$2.5 billion) loan from the state-owned bank KfW had been rejected, Porsche said, with the sportscar maker saying it would not renew its application in order to "retain its credibility." "Porsche will now hold talks about alternative financing possibilities," it said in a statement. KfW would have joined the consortium of 16 lenders that will receive the normal market rate of interest on loans of over 10 billion euros, with VW shares offered as collateral. "Porsche has always made clear that what we are talking about here is a loan for its operations that will not burden the German taxpayer," the automaker said. Porsche has gone from being a star of the German auto industry to being in dire financial straits, saddled with some nine billion euros' worth of debt amassed while building up a 51% stake in VW last year. The company has also been in talks with Qatar with a view to the Gulf state investing in the company. A Porsche spokesman said late Monday that Qatar had made an offer to buy a stake as well as stock options that Porsche owns in VW. Porsche intended to complete a full takeover of VW, Europe's biggest automaker, but in late May it was forced to scale back its ambitions with the two firms announcing they were seeking a merger. The atmosphere has been clouded further, however, by a struggle between Porsche's owners, the Porsche and Piech families. Two cousins, Ferdinand Piech and Wolfgang Porsche, head the respective supervisory boards at VW and Porsche and have very different views about how to pull Porsche out of its difficulties. Squabbling between the two has reinforced hostility among German officials to providing the sports car maker with public aid. Public aid is meant for companies that have been hit by the global economic slowdown, whereas Porsche's problems stem mainly from an attempt to raise its holding in VW to around 70% through the use of complex stock options. The head of Porsche, Wendelin Wiedeking, has until now also been highly critical of state intervention, saying once that "luxury and assistance do not fit well together." Copyright Agence France-Presse, 2009

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