The Economist (2022-02-26) Riva

64 Business TheEconomistFebruary26th 2022

VolkswagenandPorsche

Reversegear

P

urchasinganewPorscheoftenin-

volvesalongwait.Iflimitedproduction

and aloofdealersweren’t enough ofa

bottleneck,somebuyersfacefurtherde-

laysafterafirethatbrokeoutlastweek

mid-Atlanticonashipcarrying4,000ve-

hicles,includingPorsches,fromthestable

ofbrandsownedbyVolkswagen(vw).

AswithPorsches,so,too,withPorsche

thecompany.Talkoflettinginvestors buy

asliceoftheillustrioussports-carmaker

hasbeenintheairalmosteversince it

combinedwithvwafterPorsche’sauda-

ciousattempttotakeoverthemuchlarger

Germancompanyin2008.Thatmisadven-

turebroughtPorscheclosetobankruptcy,

avertedthankstoarescuebyvw.One up-

shotoftheaffairwasforthePorschebrand

tobecomevw’swhollyownedsubsidiary

in 2012 .Anotherwasthattheholdingcom-

panycontrolledbythesecretivePorsche

and Piëchfamilies, descendantsof the

sports-carmaker’sfounders,became vw’s

largestshareholder.

Apartingofthewaysnowlookscloser

thanever.OnFebruary22ndvwand the

families’holdingcompanysaidthey were

in“advanceddiscussions”overaninitial

publicoffering(ipo)ofPorsche.

Forvw’sboss,HerbertDiess,thespin-

offcouldnotcomesoonenough.He has

beentryingtostreamlinevw’sunwieldy

collectionoftendistinctmarques.Dealing

withflashyPorsche,whichhasalways re-

gardeditselfasacutabovetherestof the

group,isaheadachehecandowithout.

Porscheinsisted,forexample,ondevelop-

ingitsownplatformtounderpinelectric

modelsratherthancuttingcostsbyshar-

ingonewiththegroup’sotherbrands.

AnipowouldalsoraisecashforMr

Diesstoploughintohisreinventionofvw

asamakerofsoftware-intensiveelectric

vehicles.Manufacturersofupmarketcars

havelookedenviouslyatFerrarisinceits

flotationin2015.TheItalianfirm’sstock-

marketvaluehasdoubledinthreeyears,to

€35bn($40bn).Itisvaluedmorerichly,rel-

ativetoearnings,thantheluxury-goods

firmsitsoughttomatch—letalonethan

lowlycarmakers.(Thefamilyholdingcom-

panyofFerrari’schairmanownspartofThe

Economist’sparentcompany.)

Porsche is no Ferrari. Its operating mar-

gin of over 15% is well below the Italian

company’s 25% or so. But it handily out-

performs the rest of vw. Despite making

only 277,000 of the 11m vehicles that the

group turned out in 2019, before the pan-

demic and the ensuing chip crunch, it ac-

counted for a tenth of the group’s revenues

and a quarter of its operating profit. The

Taycan, a battery-powered model, shows it

has a clear and profitable strategy for elec-

trification that most other sports-car firms

lack. Philippe Houchois of Jefferies, a

bank, reckons that Porsche is worth

€60bn-90bn. That is more than half of vw’s

current market capitalisation of €109bn.

And the Porsche and Piëch families? By

some estimates their members would now

be twice as rich had they not attempted the

abortive takeover in 2008. And their hold-

ing company will need to raise money to

buy Porsche stock, perhaps by selling some

of their vwshares. But, as Mr Houchois

points out, they would at least reclaim a

more direct stake inthefirm that bears the

family name. Perhapsthat is what they

have been waiting for.

TwoGermancarmakersareset

touncouple

End in sight

closures when they are with piglet.

Mr Icahn’s campaign is also unusual in

that McDonald’s is in rude health. Most

shareholders are happy with the chief ex-

ecutive, Chris Kempczinski. The company

is reporting “some of the highest margins

ever”, notes Sara Senatore of Bank of Amer-

ica. Mr Kempczinski, who took over as ceo

months before covid-19 spread around the

world, has enjoyed tailwinds from the pan-

demic, which increased McDonald’s on-

line orders and business at its drive-

throughs. He has also jazzed up the brand,

by teaming up with celebrities such as bts,

a South Korean boy band, Travis Scott, an

American rapper and J. Balvin, a Colombi-

an singer. For a limited time, star-struck

clients could order a btsmeal (Chicken

McNuggets, a medium packet of chips and

a medium Coke) or a Travis Scott one (a me-

dium Sprite, a quarter-pounder with bacon

and chips with barbecue sauce).

Seemingly underpowered activists

have notched up several surprise victories

against managements of late. Most nota-

bly, a year ago Engine No.1, an activist

hedge fund with a stake of just 0.02% in

ExxonMobil, secured three seats on the oil

giant’s board for climate-friendly share-

holder representatives. That made large

companies think again about dismissing

small activist investors as unserious, espe-

cially on environmental or social issues

that other shareholders may also see as

worthy causes. But the ExxonMobil coup

took place when the company was under-

performing its rivals like Chevron. McDon-

ald’s, by contrast, is running onion rings

around its competitors (see chart).

Mr Icahn’s nominees are Leslie Samuel-

rich, an asset manager focused on sustain-

ability, and Maisie Ganzler, an executive at

Bon Appétit, a restaurant company. Share-

holders will vote on the board’s composi-

tion at their annual meeting this spring.

The wily Mr Icahn may not get his way, for

once. Even if he does, any Icahn lift he

cashes in on wouldscarcely pay for one

dinner at the higher-end restaurants he

normally frequents.

Investors are lovin’ it

Total returns, January 1st 2017=100

$ terms

Source:RefinitivDatastream

250

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150

100

50

2017 18 19 20 21 22

Restaurant Brands

International

Yum! Brands

McDonald’s