Porsche refuses to cede victory to VW in power test

By Hendrik Sackmann and Jan Schwartz

STUTTGART/HAMBURG, Germany (Reuters) - Porsche SE (PSHG_p.DE) on Thursday refused to cede victory to Volkswagen (VOWG.DE) in a test of wills over who will control the automotive juggernaut the German carmakers aim to forge.

Dismissing reports that Porsche's owner clans had finally settled the power struggle, Porsche Deputy Chairman Uwe Hueck said he had been promised by the two families that they would make no decisions before consulting Porsche's supervisory board.

A source close to Volkswagen told Reuters the families had struck a deal in principle that would let Europe's biggest carmaker absorb debt-laden Porsche's healthy sports car business, initially by buying a 49.9 percent stake in Porsche AG.

That would hand victory to VW Chairman Ferdinand Piech, who has been pushing such a deal for months as a way to add a 10th brand to his sprawling automotive empire that ranges from tiny VW models to high-end Bugattis and Lamborghinis to heavy trucks.

It would also mark a setback to Piech's cousin Wolfgang Porsche -- the chairman of Porsche SE who with his Chief Executive Wendelin Wiedeking has rejected such a sale.

VW had won over Wolfgang Porsche, the source said, adding the issue now was persuading Porsche management to go along with a plan that would undercut Wiedeking's authority.

Selling a Porsche AG stake remains an option, Hueck told reporters, but added that he and Wiedeking preferred to strengthen the group's balance sheet by issuing new shares and selling a stake to a Qatari investment fund.

"Hans Michel Piech and Wolfgang Porsche have given me their word that the families will not decide anything without discussing it with the supervisory board," said Hueck, who is Porsche's top labor leader.

Hans Michel Piech is Ferdinand's brother and a Porsche board member.

STUTTGART SHOWDOWN

What the Piech brothers and Wolfgang Porsche decide behind closed doors will determine the shape of any deal. The families are contractually obliged to vote together on strategic issues.

The boards of both companies meet separately in Porsche's home town of Stuttgart on July 23, setting the stage for a showdown in the months-long saga.

Porsche had to abandon plans to take full control of its much larger peer as its debt mounted -- sources told Reuters on Wednesday its net debt has surpassed 10 billion euros ($14.09 billion) -- just as global car markets collapsed.

That left Porsche with a 51 percent stake in VW, which agreed on May 6 to enter talks on creating an integrated car group.

Porsche, whose Porsche AG unit makes the famed 911 sports car, has been in talks for weeks with Qatar about selling a minority stake or a package of options that control 20 percent of VW shares.