VOLKSWAGEN IS considering an audacious bid for Porsche’s automotive business in another extraordinary twist in the corporate saga surrounding Germany’s most famous car dynasty.

Several people close to the situation said VW management was weighing the option of buying Porsche AG, a move that would bring relief to the highly indebted Porsche holding company.

This would turn upside down Porsche’s audacious takeover of Volkswagen, which started 3½ years ago. VW is Europe’s largest car company and its turnover is roughly 15 times as great as Porsche’s.

“The tail would finally stop wagging the dog,” a person familiar with the thinking of Volkswagen’s management said.

Wendelin Wiedeking, Porsche’s chief executive, has in the past repeatedly locked horns with VW’s management and works council.

The plan would allow Ferdinand Piëch, grandson of Ferdinand Porsche, the founder who designed the VW Beetle, to integrate the sports carmaker into Volkswagen as its 10th marque and thus finalise his task of reuniting his family heritage.

The Porsche and Piëch family clans jointly own Porsche SE, the holding company that owns the sports car business as well as 50.76 per cent of VW’s shares.

The consideration, which is facing many obstacles and could be dropped in favour of another solution, came after Porsche revealed it had net debt of €9 billion.

A Porsche spokesman, who said he was unaware of the takeover plans, said the €280 million it was about to receive in VW dividends and its operating profit would be enough to make its interest payments this year.

Porsche has reaped huge profits from controversial VW option trades. It made €6.8 billion, more than double its revenue, from its VW takeover in the past six months alone. However, analysts said most of these profits were paper gains and could not be easily converted into cash.

Arndt Ellinghorst, analyst at Credit Suisse, said it would be the most logical solution to use VW’s €10.7 billion in net cash from its automotive division to buy the sports car business.

People close to the situation warned the plan was still facing obstacles, such as the question of Porsche’s valuation.

Estimates vary widely from €6 billion to €9 billion.

Another question is whether the regional state of Lower Saxony, which owns about 20 per cent of VW, would support such a move. – Copyright The Financial Times Ltd 2009