Porsche chief savages US carmakers over self-inflicted wounds

Rival motor manufacturers accused of driving the industry to the brink of ruin

Porsche executives have savaged rival carmakers for driving the industry to the brink of ruin and accused banks of forcing financially sound component supplier companies out of business.

Wendelin Wiedeking, the chief executive of the German sports car group, said today it could only be a matter of time before hedge funds took majority control of one of the US car manufacturers that had inflicted damage on themselves with ruinous discounts and hugely subsidised leasing rates.

His outspoken comments against a bail-out of the industry came as the European commission outlined the case for at least €5bn (£4.2bn) of extra funding for Europe's carmakers to help them develop more eco-friendly cars and green technologies.

This falls far short of the €40bn sought by the EU car sector and by the French president, Nicolas Sarkozy, who is due to announce his own plans this week for green domestic manufacturers such as Renault and Peugeot Citroën.

The EC believes subsidies on the scale of the $25bn-50bn sought by the US's big three — General Motors, Ford and Chrysler — are incompatible with World Trade Organisation rules and would provoke official complaints to the Geneva-based body, which is due to rule soon on aid for the rival planemakers Airbus and Boeing.

Neelie Kroes, the EU competition commissioner, rejected a general car industry bail-out last week and warned against a subsidy war.

At most, next month's EU summit is expected to approve increased lending by the European Investment Bank to promote green technologies such as hybrids or fuelcells, with talk of an extra €2bn being made available.

Wiedeking, the architect of Porsche's strategy to take over Volkswagen and turn it into the world's leading carmaker, accused General Motors of "openly threatening" the US government it would go bust by the end of January without a bail-out. The big three are burning cash at about $2bn a month.

Holger Härter, Porsche's chief financial officer, said small- and medium-sized supplier companies could not press for a government bail-out but were running into hard times "without having made any mistakes themselves simply because banks are terminating their loans or refuse refinancing options. Ultimately, this means that a supplier basically resting on a strong business foundation may go belly-up from one day to the next".

Companies such as Siemens are making forward loans to suppliers to keep them going and Porsche is helping their liquidity with advance payments.

Wiedeking and Härter both urged the authorities to suspend the Basle II rules requiring banks to retain minimum reserves "in order to give companies air to breathe in these difficult economic times". This would be a far cheaper option for governments trying to handle the financial crisis in industry, Härter said.

Wiedeking told Porsche's annual press conference: "We need banks to give credit, not just talk about credit ratings but start real actual lending to companies. These rules are choking us today.

"Stabilisation of the financial system has to take place rather than banks shifting hundreds of billions of euros to the European Central Bank to earn interest. They should be injecting money so healthy companies survive."

Porsche is the world's most profitable car firm with pre-tax earnings of €8.6bn in its last fiscal year — more than its annual turnover of €7.47bn — but it indicated that it, too has suffered from the economic downturn and slump in demand for cars.

Sales in the four months from August 1, it said, were likely to have gone down 18% to 25,000 from more than 30,000 a year ago while turnover is estimated to have dropped 15% to just above €2bn, compared with €2.4bn in the same period of 2007-08.

Wiedeking said there would be a "significant decrease" this year from last year's record sales of close to 100,000 cars but insisted the outlook was so uncertain he could not give any profits forecast.

Porsche's margins, which were more than 20% last year, would remain in double digits, he added.

The deteriorating economy has hit Porsche's plans to take over more than 50% of Volkswagen by the end of the year, but Wiedeking said the goal was still to raise its stake to 75% in 2009 — when VW's share price was "sustainable".

Porsche, which holds 42.6% of VW and has options for a further 31.5%, has been slammed as a giant hedge fund after making the bulk of its profits on VW options trading. But Härter said it was "absurd" to say it had acted to damage hedge funds and blamed short sellers for last month's market distortions.


David Gow in Stuttgart

The GuardianTramp

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