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Volkswagen proposes Porsche merger

Update: Porsche has confirmed today that it has rejected the Volkswagen ultimatum.

Volkswagen has proposed an offer to rival German carmaker Porsche that would eventually lead to a merger.

Under the proposed plan, the Gulf state of Qatar will get up to a 20 percent stake, Lower Saxony 20 percent, and the two Porsche owners (Porsche and Piech families), would get 40 percent of the newly merged company.

On January 7, 2009, Porsche announced it upped its stake in VW to 50.8 percent and made it clear it wanted financial control over VW with its goal of reaching a 75 percent stake in the firm.

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Porsche makes EUR 6.8B from VW options, VW opens India plant

German sports carmaker Porsche has made EUR 6.8 billion by buying long Volkswagen options. The money was made in only six months ended Jan 31, 2009.

Porsche went long in VW while others shorted the company, including German billionaire Adolf Merckle, 74, who lost $400 million by shorting the VW shares, who later apparently committed suicide by stepping into the path of a train in his home town of Blaubeurennear in southwestern Germany. Read the full story

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GM About to Kill Dealers, Fidelity, Mattel, AMD Slash Jobs

GM is burning cash every month and needs some serious cash to fund operations. That is why it could have really used the $10 million loan from the Fed it was seeking that never materialized. That money GM could have also used to acquire Chrysler. GM still remains as the most likely choice for a Chrysler merger, which would significantly benefit GM because Chrysler actually has a lot of cash on hand. Despite the loan being turned down, GM is now likely trying to be classified as a Bank Holding company so that it can purchase commercial paper from the Federal Reserve’s $700 billion bailout fund.

As world economic volatility and the credit crisis remain active, GM is tightening various restrictions including new financial restrictions from its “captive arm” that is suppose to help dealers financially to sell vehicles. Because of the credit crisis, GMAC (wholly owned subsidiary of Chrysler & GM, 51% and 49%, stake respectively) lost $2.5 billion in Q3 of which $194 million was from auto financing. As GM tries to get cash, it has introduced new GMAC terms that will likely have very negative consequences for dealers and lead to closures. Under the new terms, GMAC will only approve loans from people with a credit score of >700 and it will fund less of the principal meaning buyers will have to put up higher down payments. In addition, GMAC is demanding dealers begin immediate repayment car loans, even on 2007 vehicles that are still on the lot. The biggest concern here is as GM vehicles become more expensive (and people are not spending their cash), sales for dealers will dramatically drop, and dealers could become insolvent because of the new loan repayment terms.

Adding further global economic fears, there are yet more job losses. Toymaker giant Mattel has announced it is reducing its cmanagement and professional staff by 8%, or by 1,000 people. Mattel’s sales have increased by 6% to $1.95 billion in Q3, though the toy maker is facing increases costs including recent costs with the Chinese lead problem in toys. Mattel’s stock also is tanking. Additionally, the largest US mutual fund company, Fidelity, has also announced it is slashing 1,300 jobs. Fidelity remains a strong investment company and has earned a $30 billion net gain up to this point in 2008.

AMD also announced today it is cutting 500 employees to cut costs and return to profitability. The AMD stock subsequently tanked.

Also, Porsche’s sales recently dropped by almost 70% in October 08.

It is very clear the financial crisis is impacting everyone, so hold onto your money because its going to get worse before it gets better anytime soon.

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