Volkswagen says it’s breaking off Porsche talks

updated 2:08 p.m. ET May 17, 2009

BERLIN - Volkswagen AG said Sunday it was indefinitely postponing talks over a planned integration with Porsche SE, but the sports car maker insisted that only the next round had been canceled.

As the power struggle between two of Germany’s leading automobile companies appeared to increase, Volkswagen spokesman Peik von Bestenbostel told The Associated Press that the talks had been put on hold for an undetermined period of time, demanding a more direct engagement from Porsche.

“Before we can take up talks again, it is necessary that Porsche adopts a clearly constructive attitude toward them,” Peik von Bestenbostel said.

But Porsche insisted in a statement Sunday that while a working group meeting Monday on the fusion of the two car makers had been canceled, “The negotiations that were begun last week will continue as planned.”

The wrangling comes on the eve of a meeting by Porsche’s supervisory board, which will bring together VW Chairman Ferdinand Piech and members of the Porsche family — controlling shareholders of Porsche Automobil Holding SE.

Earlier this month, Piech and the Porsche family agreed on a plan to integrate the Porsche car-manufacturing group with Volkswagen, with the independence of the 10 brands of both companies being ensured.

But Piech, a grandson of Ferdinand Porsche, who founded the company that bears his name, questioned the plan on Tuesday by saying Porsche must reduce its debt before an integration could be possible, referring to the euro9 billion ($12.22 billion) in net debt Porsche took on as it brought its stake in Volkswagen up to 51 percent last year.

How best to handle that debt is expected to be the focus of Monday’s supervisory board meeting.

Yet VW also has accused Porsche of withholding information regarding the true expanse of its debts and what it expects to see happen if the two companies merge.

Gunnar Kilian, spokesman for the head of Volkswagen’s works council, Bernd Osterloh, told The Associated Press that constructive negotiations were not possible in the “current environment,” and he urged Porsche to clarify exactly how it envisions the integration process moving forward.

“Before we can proceed, Porsche needs to clarify exactly how they want to proceed in the event of a fusion. In particular, this needs to be discussed with our colleagues at Porsche,” Kilian wrote in an e-mail.

“Everyone at Volkswagen — from the supervisory board to the executive board to the works council — is open for a solution. But Porsche needs to make it clear internally what they hope to achieve.”

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