Porsche May Not Raise Stake in VW, Source Says

Wahington DC November 9, 2006; The AIADA newsletter reported that according to a report in Automotive News, Porsche may not raise its stake in Volkswagen if the so-called VW Law is not repealed, a source familiar with the situation said today.

Under the VW Law, individual shareholders are prevented from exercising more than 20 percent of VW's voting rights, regardless of the size of the stake. The provision was added to the books after the German state privatized Volkswagen in 1960, in order to prevent a takeover.

Porsche is co-owned by Ferdinand Piech, chairman and former CEO of Volkswagen, who is a grandson of legendary VW Beetle developer Ferdinand Porsche.

Late last year, Porsche became VW's largest shareholder after acquiring 59.6 million shares, for roughly $3.83 billion. In July, the German cartel office gave the automaker an OK to up its stake in VW.

Porsche must now decide whether to increase its holdings from 21.3 percent to a 25.1 percent blocking minority, but according to the source, the automaker is waiting for a 2007 decision by the European Court of Justice where the European Commission plans to challenge the VW Law.