VOLKSWAGEN STYMIES PORSCHE ATTEMPS TO MERGE
Volkswagen froze talks over a merger that could bail out its majority owner Porsche SE , leaving the luxury carmaker scrambling to reassure investors a deal to unite the two was still alive.
Porsche insisted the talks to create a sweeping automotive empire were still on and that it faced no short-term financing issues, but the standoff heightened market concern about how the firm would fund its 9 billion euro ($12.1 billion) debt pile -- sending its shares down more than 9 percent at one stage.
A Porsche source confirmed a report it had asked German state bank KfW whether it could qualify for 1 billion euros in loans. Porsche said it had not applied for state aid.
With nerves already stretched after VW called off merger talks set for Monday, a source close to Volkswagen Chairman Ferdinand Piech told Reuters that a meeting scheduled for Wednesday was also canceled. Discussions could only resume if Porsche sheds more light on its finances, the source said.
The news focused attention on the potential financial risk posed by Porsche's complex web of derivative contracts, which have undermined its attempts to forge closer ties with conservatively funded VW.
"We must get a clear idea of the true state of affairs at Porsche. We need absolute transparency with regard to the present situation," Volkswagen Chief Executive Martin Winterkorn wrote in a letter to staff seen by Reuters.
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