Porsche Holding warns of writing down Volkswagen stake by up to 20 billion euros

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Porsche expects to write down its stake in Volkswagen by up to 40% as uncertainty over factory closures and strikes forces Europe’s largest automaker to put its annual financial plan on hold.

The Porsche-Piech family holding said on Friday it expected to write down the value of its stake in Volkswagen by 7 billion to 20 billion euros as the company lacks financial data, meaning it must rely on analysts’ expectations.

For the same reason, the company expects to write down its stake in sports car maker Porsche AG, which is partially listed in 2022, by 1 billion to 2 billion euros.

Porsche SE added that the book value of both shares will “continue to be significantly higher than their respective stock market values.”

As of September, Porsche SE valued its 53.3% stake in Volkswagen’s voting shares at 51.5 billion euros, and its 25% plus one voting share in Porsche AG was valued at 10.5 billion euros. .

The announcement of the expected writedown comes as Volkswagen prepares for a fifth round of talks with union IG Metall on Monday, amid a deadlock with workers over plans to close some German plants and lay off tens of thousands of workers.

IG Metall and VW’s powerful works council have fiercely resisted the restructuring plan, which executives believe is necessary due to a structural decline in European car sales.

Chief Financial Officer Arno Antlitz warned in September that Volkswagen’s flagship brand now sells about 500,000 fewer cars a year than before the pandemic.

During the same period, the brand’s sales share in China, its most profitable market, has almost halved as consumers shift to electric and hybrid vehicles and competition from local rivals such as BYD intensifies.

But worker representatives argue that cost cutting alone will not solve the problem of falling sales and blame senior executives for making poor product decisions.

On Monday, workers at most Volkswagen plants in Germany put down their tools and left work four hours early for the second time in a month – double the length of the strike the previous week.

IG Metall warned that the strike will become more intense if Volkswagen does not abandon its plan to close the factory.