VW Says Porsche Must Reduce Debt

Sports car maker Porsche SE must solve its own financial problems before integrating with Volkswagen AG, VW's chairman Ferdinand Piech said.

FRANKFURT (AP) -- Sports car marker Porsche SE must reduce its debt before integrating with Volkswagen AG, VW's chairman Ferdinand Piech said.

Piech, grandson of Ferdinand Porsche, who founded the company that bears his name, told reporters late Monday that "Porsche has its own financial problems to solve" before any moves can be made. Porsche, in which Piech's family shares a controlling stake, owns a majority of VW shares.

Piech was referring to the euro9 billion ($12.22 billion) in net debt Porsche took on as it bought up Volkswagen shares, lifting its stake to some 51 percent at a time when auto markets have slumped and credit has grown scarce.

"I cannot imagine that Volkswagen would shoulder someone else's risk," said Piech, who is chairman of Volkswagen's supervisory board, the German equivalent to a U.S. board of directors.

He made the remarks to reporters in Sardinia, Italy, where Volkswagen was unveiling its latest Polo model.

Last week the Piech and Porsche families -- controlling shareholders of Porsche Automobil Holding SE -- agreed on the structure of what Porsche called an integrated car-manufacturing group with Volkswagen.

Under the terms of the proposal, the 10 brands of both companies "shall stand below an integrative leading company alongside each other, whereby the independence of all brands and explicitly also of Porsche shall be ensured," Porsche said.

Volkswagen's brands include Skoda, Seat, Bugatti, Bentley and Scania trucks.

Any decision must still be approved by both companies' boards as well as the German state of Lower Saxony, which holds 21 percent of Volkswagen.

Volkswagen and Porsche have set up a joint working group to consult with Lower Saxony and labor groups as it defines the new structure, a process expected to last until June.

In a separate development Tuesday, Anja Engelland, a spokeswoman for German financial regulator BaFin, said it was looking into suspicion of market manipulation by Porsche regarding the timing of its announcement that it planned to raise its stake in VW to 75 percent.

At issue is whether Porsche was planning the move well before it reported its intentions in October last year. Financial securities law requires major decisions on investments to be announced immediately upon being made.

Shares of Porsche were down about 7 percent at euro41.75 in Frankfurt afternoon trading. Shares of Volkswagen were down about 1 percent at euro228.35.

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