Why Porsche would be mad to bid for Volkswagen

Matthew Lynn says Porsche is supremely successful in its own niche, but that does not qualify it to run Europe’s largest mass-market car maker

There are only three hard and fast rules in the motor industry, if you want to make money. Never build an orange car; steer clear of Formula 1; and never bet against Porsche.

For the last decade the Stuttgart-based manufacturer of high-performance sports cars has existed in its own parallel universe. While the rest of the European industry battles with intransigent unions, soaring costs and vicious global competition, Porsche just taps the accelerator and flashes away into the distance. But now the moment of hubris seems to have arrived. At its apogee, Porsche seems intent upon taking control of Europe’s largest car manufacturer, the mighty Volkswagen. It clearly believes it can save VW, but it is almost certainly wrong. For German luxury-car makers, moving into the mass market has invariably proved disastrous. Daimler made a hash of buying Chrysler; if it could give the ailing US company away, it would. BMW, usually the most dependable of companies, made an even worse mess of Rover. It’s hard to see Porsche doing any better with Volkswagen.

Still, it looks determined to try. It has already bought 27 per cent of VW and has said it may soon take that up to a level at which it would have to launch a full bid. Announcing its latest results last month, Porsche said it planned to raise an extra eight billion euros to fund acquisitions: money clearly earmarked for VW. And the complex series of trusts through which the Porsche family controls the business has just been reshuffled, a move which, as the investment bank UBS put it, would ‘allow the family to move quickly and unanimously’ if it wanted to make a bid.