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Volkswagen Prepares Update on Strategy, Corporate Structure

Date : 07/05/2012 @ 1:17PM
Source : Dow Jones News
Stock : Daimler AG NA O.N. (DAI)
Quote : 60.73  -1.11 (-1.79%) @ 11:29AM
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Volkswagen Prepares Update on Strategy, Corporate Structure

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   By Christoph Rauwald 
 

FRANKFURT--Volkswagen AG (VOW.XE) will soon present an update on its future strategy to investors as its new corporate structure is shaping up following the purchase of Porsche Automobil Holding SE's (PAH3.XE) sportscar business amid concerns that the group might become increasingly difficult to run.

There are "a number of key issues" that are "important to explain" to investors, analysts and media, Volkswagen's Chief Financial Officer Hans Dieter Poetsch told analysts during a telephone conference Thursday.

Mr. Poetsch said Volkswagen is preparing to inform markets on how Europe's largest auto maker by sales with its complex line-up of truck, car, motorbike and financial services operations will work in the future, including anticipated returns and cash flows. He declined to elaborate on details or the timeframe as preparations haven't been finalized.

The German auto giant late Wednesday hammered out a deal to fully integrate Porsche's sportscar unit into its stable of brands two years earlier than expected to reap more cost synergies, faster. It will pay 4.46 billion euros ($5.61 billion) in cash and additionally transfer one common share to Porsche's holding firm to avoid a larger tax bill.

The deal marks the latest step as part of the German auto maker's bold expansion plan to clinch the industry's top spot by 2018.

The deal, which is set to take effect Aug. 1, was praised by analysts as it improves transparency and enables the two car makers to benefit from greater economies of scale. Porsche's coveted sportscar business is one of the world's most profitable car companies.

"This is actually great news for VW since the company manages to acquire all of Porsche [sportscar business] for an enterprise value of around EUR11 billion," Credit Suisse analyst Arndt Ellinghorst said in a note. He said Porsche "should be worth at least EUR21 billion."

Mr. Ellinghorst rates Volkswagen preference stock as outperform.

Mr. Poetsch Thursday dismissed concerns that Volkswagen's liquidity position might get rather thin after the expected EUR7 billion cash outflow related to the Porsche deal. Volkswagen's net liquidity stood at EUR15.8 billion at the end of the first quarter and Mr. Poetsch in the past had described a level of around EUR7 billion as sufficient for VW.

Mr. Poetsch said he remains "absolutely comfortable" with Volkswagen's current liquidity level and expects no effect on the company's credit ratings triggered by the Porsche deal.

Fitch Ratings backed his view Thursday and affirmed Volkswagen's Long-term Issuer Default Rating and senior unsecured notes at A- and Short-term IDR at F2.

Investors, however, will be keen to learn more about Volkswagen's future strategy at the planned briefing as the company aims to become the world's largest auto maker by 2018.

Volkswagen posted record vehicles sales and profits last year, due mainly to its large footprint in emerging markets such as China, superior pricing power in the highly competitive European car market and sales gains in the U.S. But the aggressive expansion along with its growing industrial complexity has sparked concerns that the company is becoming increasingly difficult to manage.

Volkswagen took over German truck maker MAN SE (MAN.XE) last year to forge a European truck alliance with its other truck unit, Scania AB (SCV-A.SK), and take on global market leaders Daimler AG (DAI.XE) and Volvo AB (VOLV-B.SK).

Additionally, it entered the motorbike segment by clinching the acquisition of Italy's Ducati Motor Holding SpA in April.

Volkswagen employs more then 500,000 people across the globe.

-Write to Christoph Rauwald at christoph.rauwald@dowjones.com



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