The planned merger between Porsche and Volkswagen has been plunged into uncertainty after talks between the two carmakers were suspended last night.
VW said it had called off negotiations indefinitely and accused Porsche of failing to be clear about its own financial position.
The two companies had been due to hold working party discussions on the merger today. But in an email to senior staff, VW's chief executive, Martin Winterkorn, said he was not prepared to risk his company's financial stability by continuing talks with debt-heavy Porsche.
"For a merger of Volkswagen and Porsche, we must systematically analyse the initial position and get a clear picture of the real situation at Porsche," Winterkorn said.
Shares in Porsche fell by more than 5.5% this morning, though insiders insisted the deal had not collapsed permanently.
The two companies agreed to merge earlier this month, bringing an end to Porsche's audacious attempts to seize control of its larger rival in the "takeover of the decade".
During that battle, Porsche built up a €9bn (£8bn) debt mountain buying up 51% of VW, and also holds options allowing it to buy more shares. Many hedge funds suffered major losses when the true scale of Porsche's interest in VW came to light, as they had short-sold the company on the belief it was overvalued.
The potential merger is a family affair. VW's chairman, Ferdinand Piëch, is the grandson of Porsche-founder Ferdinand Porsche. Piëch himself owns 13% of Porsche but like other family members is not involved in the day-to-day running of the company.
Both firms' workers are also concerned about the implications of a merger, at a time when car sales have dropped around the world. According to one report, Porsche workers will hold their first ever strike today in protest at the plan.
