Porsche unable to pay debt

Porsche is so deeply in debt that it has requested a �1.75bn loan (�1.5bn) from the German state bank KfW, according to reports from Germany.

Porsche is weighed down by debts of �9bn (�7.6bn), an overhang from the sports car maker�s audacious attempt to takeover the whole VW Group. In recent days Porsche boss, Wendelin Wiedeking has written to union boss Bertold Huber and VW Group chairman Ferdinand Piech, warning them not to discuss Porsche�s debt problems in public. Wiedeking is said to be fearful that Porsche could be refused the loan. Porsche is also currently discussing selling a stake in itself to the Qatar Investment Authority to relive its debt problems. If that sale is a success, Porsche will then probably merge with the wider VW Group.

In the meantime, however, Porsche also runs the risk of VW stock prices collapsing, which could, in turn, force Porsche to make high-value cash payouts to investors. Despite having to finance its debts and the effects of the global financial meltdown, Porsche says that it will return pre-tax profits. However, analysts say that much of gain was from Porsche�s stock market speculation on VW share price. Many in the city have described Porsche as a �hedge fund with a automotive subsidiary�.

Over the last 9 months Porsche�s automotive sales have dropped 28% to 53,635 units, with the Boxster and Cayman particularly affected by the global turndown. However, turnover was down by only 15% to �4.6bn (�3.91m) underlining that sales of higher-end Porsches have not been the hardest hit.

Porsche claims that its profit margins just missed being �in double figures�. Over the last decade, Porsche has returned profit margins variously between 13 and 20%, which were by far the highest in the global auto industry.