VW halts merger talk with Porsche

Volkswagen on Sunday slammed the brakes on merger talks with Porsche, just before the first meeting to discuss ways to bring all of the automakers' brands together under one entity.

VW said that it made the move because it believes that Porsche doesn't have a solid plan for the merger.

VW and Porsche announced the plan to hold merger talks on May 6. The goal was to create a merger plan within four weeks. The meeting was to include the automakers' labor groups and the German state of Lower Saxony, which holds veto power over major changes at VW.

The move toward a merger was a change in strategy for Porsche, which has been buying up VW stock. Porsche has said that it controls 51 percent of the voting stock of VW, and Porsche was pushing to increase its share to 75 percent to give it near total control. The plan was championed by Porsche CEO Wendelin Wiedeking.

But that plan stalled out as the global credit freeze made it impossible for heavily indebted Porsche to borrow more money to buy more VW stock.

VW said it is not known when the talks may begin. Porsche declined to comment, according to Reuters.

Porsche's supervisory board was scheduled to meet Monday.

Meanwhile, several government and business officials, including VW chairman Ferdinand Piech, have publicly supported VW CEO Martin Winterkorn as the man to lead a merged VW-Porsche. That move, if it were to happen, would be a rebuke to Porsche's Wiedeking.

Winterkorn rose to VW's CEO job after the surprise resignation of Bernd Pischetsrieder in late 2006, a change many insiders believe was steered by Piech.

Piech, a major shareholder in Porsche, said at a car-launch program last week that it was unlikely that Wiedeking would be happy to stay on in a more "lowly" role at a merged Porsche and VW, according to Reuters.

By Dale Jewett