The Economist - USA (2022-02-26)

64 Business TheEconomistFebruary26th 2022

VolkswagenandPorsche

Reverse gear

P

urchasing anewPorscheoften in­

volvesa longwait.If limitedproduction

and aloof dealers weren’t enough of a

bottleneck,somebuyersfacefurtherde­

laysafterafirethatbrokeout lastweek

mid­Atlanticona shipcarrying4,000ve­

hicles,includingPorsches,fromthestable

ofbrandsownedbyVolkswagen(vw).

AswithPorsches,so,too,withPorsche

thecompany.Talkoflettinginvestors buy

a sliceoftheillustrioussports­carmaker

hasbeen intheairalmosteversince  it

combined withvwafterPorsche’sauda­

ciousattempttotakeoverthemuchlarger

Germancompanyin2008.Thatmisadven­

turebroughtPorscheclosetobankruptcy,

avertedthankstoa rescuebyvw. One up­

shotoftheaffairwasforthePorschebrand

tobecomevw’swhollyownedsubsidiary

in 2012 .Anotherwasthattheholdingcom­

panycontrolledbythesecretivePorsche

and Piëch families, descendants of  the

sports­carmaker’sfounders,became  vw’s

largestshareholder.

Apartingofthewaysnowlookscloser

thanever.OnFebruary22ndvwand  the

families’holdingcompanysaidthey were

in“advanceddiscussions”overaninitial

publicoffering(ipo) ofPorsche.

Forvw’sboss,HerbertDiess,thespin­

offcouldnotcomesoonenough.He  has

beentryingto streamlinevw’sunwieldy

collectionoftendistinctmarques.Dealing

withflashyPorsche,whichhasalways  re­

gardeditselfasa cutabovetherestof  the

group,isaheadachehecandowithout.

Porscheinsisted,forexample,ondevelop­

ingitsownplatformtounderpinelectric

modelsratherthancuttingcostsbyshar­

ingonewiththegroup’sotherbrands.

Anipowouldalso raisecash forMr

Diesstoploughintohisreinventionofvw

asamakerofsoftware­intensiveelectric

vehicles.Manufacturersofupmarketcars

havelookedenviouslyatFerrarisinceits

flotationin2015.TheItalianfirm’sstock­

marketvaluehasdoubledinthreeyears,to

€35bn($40bn).It isvaluedmorerichly,rel­

ativetoearnings, thantheluxury­goods

firmsitsoughttomatch—letalonethan

lowlycarmakers.(Thefamilyholdingcom­

panyofFerrari’schairmanownspartofThe

Economist’s parentcompany.)

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  profit.  The

Taycan, a battery­powered model, shows it

has a clear and profitable strategy for elec­

trification that most other sports­car firms

lack.  Philippe  Houchois  of  Jefferies,  a

bank,  reckons  that  Porsche  is  worth

€60bn­90bn. 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 inthefirm that bears the

family  name.  Perhapsthat  is  what  they

have been waiting for.n

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 covid­19 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,  star­struck

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 quarter­pounder 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  climate­friendly  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  higher­end  restaurants  he

normally frequents.n

Investors are lovin’ it

Total returns, January 1st 2017=100

$ terms

Source:RefinitivDatastream

250

200

150

100

50

2017 18 19 20 21 22

Restaurant Brands

International

Yum! Brands

McDonald’s