Is it the end of a sportive rhythm for Porsche ?

After a merger process with Volkswagen which should be done in 2011, Porsche has just announced its results...

Porsche Automobile Holding SE announced on the 17th of March 2010 a turnover of 3.16 billion Euros under the first half of the year 2009/2010, which will finish at the end of July, but also confirmed his forecast given last November according to which it would record a loss.

This loss could go up to 5 billion Euros for 2009/2010 because of countable adjustments, like the deconsolidation of Volkswagen AG on the 3rd of December 2009.

The speed seems to slow down for the sports cars...


Why such a current situation?

The company recorded revenues during the financial year ended July 2008 was 7,466.4 million Euros, an increase of 1.3% over 2007, But Porsche had to completely consolidate Volkswagen in his assessment after having carried his share of the rights to vote beyond 50% at the beginning of 2009. In December 2009, Volkswagen repurchased 49.9% of the artivities of Porsche for 3.9 billion Euros, within the framework of a process of fusion which must finish in 2011.

The German luxury manufacturer, which has been founded in 1900 by Ferdinand Porsche, is specialized in sports cars and all-terrain vehicles, but provides also services consisting of financing and leasing business for customers and dealerships. The Porsche Group consists of 23 German and 62 international subsidiaries and operates through 670 dealerships and 107 countries, with 12,200 workers.

What is the possible future for Porsche? how was perceived the forecast in the newspapers? The company had a strong and brilliant image for cars lovers... how would it end?

Is Porsche going to managed it with Volkswagen, or is it the end of the purrings of the luxury engines?

Newspapers analysis:

The Financial Times is optimistic about Porsche future. Indeed with the headline "Porsche shrinks ahead VW takeover" of the first of the two articles published on the 17th of March, day of the announcement, the tone is positive. The FT gives as usual lots of figures for its readers. Quoting that "it [Porsche] achieved a double-digital operating margin [...] having reduced its heavy debt loan", the FT explains that the company made an operating profit of 329 million Euros in its sports cas business in the first half of the year. Remembering the readers that Porsche sold half its business to VW to prevent itselm from being crushed, the newspapers quoters the manager: "We used most of the proceeds from the €3.9 billion sale to pay back debt, reducing the debt from about €10 billion a year earlier to €6.1 billion at the end of January". This quotation shows the tone and according to the author, Daniel Scheafer, "the company thanks to a positive accounting effect".

The second article explains that investors are getting a better view of the potential value, and focuses on the fact that toyota's recalls (explained in my first article) have helped VW to overtake Toyota as the world's largest carmaker. The good health of VW would help Porsche, according to the FT.

Le Figaro, a French newspaper, is using lots of figures, like the FT, in its article "Porsche remains profitable, reduced debt", and is also positive, quoting a Merck Finck's analyst: "The turnover is slightly higher than our estimation". Explaining that the sales had a light decrease of 1.7% compared to the first half of the year of 2008/2009, Le Figaro focuses on the fact that eventhough the sales have dropped on the North-American and European markts, it has risen in the rest of the world.

The headline "VW, Porsche merger faces risk,, delay-analysts" of the article from Reuters published on the 8th of April, goes to a completely different way than the FT or Le Figaro. According to the author, the risks from potential liabilities and hedge fund lawsuits could force the companies (Porsche and Volkswagen) to delay or abandon the planned merger next year. The author quotes a banker saying the "the level of risk factors was unusual".

Les Echos, a French newspaper, sides with Reuters, focusing on the loss forecasted, even in the headline "Porsche confirms to forecast a loss in 2009/2010", and remembers that cars manufacturer recorded a loss before tax of €4.4 billion in 2008/2009 because of the depreciation of the value of its options on the Volkswagen titles.

My Opinion:

To my point of view it is too soon to know what will happen to Porsche in the future. I will try to follow this news in the next few weeks. The company has still some debts, but has reduced them in a short term. The merger with Volkswagen, which is in a good health, is good news, but I hope that the issues which are still remaining for Porsche will not prevent Volkswagen from saving the luxury cars.

Porsche should accelerate the rhythm for the debt pay-off. The noise of cars is not very good for music to me, but Porsche cars' noise is better than others, and would be sad if this company would go bankrupt.

The relationship between a Porsche and its driver is often a "love story", that is why for the music of the week there is the Porsche's song.!!


http://www.youtube.com/watch?v=FhzyDfDetIg&feature=related

Sources:

"Porsche shrinks debt ahead of VW takeover", the Financial Times, 17th of March 2010
"Volkswagen/Porsche", the Financial Times, 17th of March 2010
"Porsche reste rentable, dette réduite", Le Figaro, 17th of March 2010
"Volkswagen: Porsche confirme prévoir une baisse en 2009/2010", Les Echos, 17h of March 2010,
"VW, Porsche merger faces risks, delay-analysts", Reuters, 8th of April 2010