Are Porsche technically bankrupt?

The Porsche Panamera launch at Shanghai - could this be the last car Porsche release as an independent car maker?

For years we’ve marvelled at the way Porsche seems to be a money-making machine. Considered by most to be the epitome of a successful car manufacturer, Porsche’s reputation has allowed them to charge more – and make more – from their cars than almost anyone else. And even in these trouble times, Porsche has been the hardest place to get a discount. Their philosophy is that slashing prices (in the way Aston Martin did with the 4.3 litre version of the V8 Vantage) is a way to ruin in the long run.

And on the face of it their attitude seemed to be right. We’ve run umpteen stories about Porsche’s profits, and just as many about the huge sums of money Porsche has made in the process of attempting to take over VW. But it’s starting to look as if it was all smoke and mirrors.

It now seems clear that all the money Porsche spent to take a controlling stake in VW was borrowed. On the face of it they were sitting on a big paper profit. But you can’t run a business on paper profits. In fact, so bad was Porsche’s financial turmoil that for two days in March the company didn’t have a single penny to its name. It was actually bailed out with a six month loan of €700 million from – VW! Shortly after this Porsche managed to secure a €10 billion line of credit, but only by using the entire Porsche set-up as collateral. But they still have a €2.5 billion funding shortfall. Basically, Porsche are in a very big hole.

So the whole idea that Porsche is going to be calling the shots and taking control of the whole VW group starts to seem very far-fetched. No wonder the merger/takeover talks have been on and off for months.

It’s starting to look as if, far from taking control of VW, Porsche is actually going to become just another part of the VW Group. Oh, dear.