German sports car maker, Porsche, will be merged into the Volkswagen group of companies following an all-night board meeting that sealed the fate of the company.

Volkswagen chairman Ferdinand Piech tightened his grip over Porsche on Thursday after the company’s chief executive was ousted following a power struggle to keep Porsche independent.

Porsche’s board, of which Mr Piech is a member, axed Wendelin Wiedeking in the early hours of Thursday morning, removing a key obstacle to the sale of Porsche’s sports car business to VW.

Porsche abandoned an audacious takeover attempt of Volkswagen after it ran up more than 10-billion euros (US$14-billion) in debt.

The Stuttgart-based company was instead forced to negotiate a merger with VW but repeatedly clashed with Volkswagen’s chairman about the terms of such a deal.

“Together, Volkswagen and Porsche have all it takes to occupy a leading position in the international automotive industry,” Mr Piech said in a statement.

Speaking in Stuttgart, Dr. Wolfgang Porsche, the company chairman and Mr Piech’s cousin, emphasized that today’s resolutions represented a landmark decision and a milestone achievement for the future.

He added: “Porsche will preserve the myth and identity of the Porsche brand in the integrated group. That brings new prospects for growth.”

Reuters Newsagency says the Porsche board also proposed raising five-billion euros in equity to prepare for the integration process. The Arab state of Qatar will also take a 17 per cent holding in the merged companies as part of the deal.

Mr Wiedeking’s ouster marks a crucial step toward adding a tenth brand to an automotive empire built by Mr Piech that includes low-end, mass-market and luxury carmakers as well as trucks, and holds the VW, Bentley, Bugatti, Skoda, Audi and Scania brands.

Reuters says Mr Piech’s career might then eclipse that of his illustrious grandfather Ferdinand Porsche, who founded Porsche and designed the original VW Beetle.

The deal still requires negotiation, but Mr Piech looks set to dictate the terms for creating an “integrated” company.

Getting hold of Porsche would also mark a return of Piech’s management influence at Porsche, where he spent nine years of his career before quitting as board member for research and production in 1971.

Although Mr Piech’s aspirations for leading Porsche were dashed in the 1970’s, he went on to hold senior positions at Audi and Mercedes-Benz before rising to become Volkswagen’s chief executive in 1993 and eventually chairman in 2002.

In recent months Mr Piech has stepped up a campaign to assert his influence over Porsche, both as a shareholder himself and as head of Volkswagen, one of Porsche’s most important suppliers.

Porsche is heavily dependent on Volkswagen, which delivers or assembles components for a third of all Porsche cars, including the body and engine for the four-door Panamera and Cayenne luxury off-road models.

Under Mr Piech VW bought the Bentley, Bugatti and Lamborghini brands in a single year.

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Following the increase in Volkswagen shares to 50.76 per cent, Porsche today announced its mandatory offer in Sweden for Scania.

However, Porsche has no strategic interest in acquiring Scania shares and is therefore offering only the minimum prices required by law.

The transfer of title to the Scania shares tendered pursuant to the mandatory offer, the so-called settlement, is envisaged to take place on 20 February 2009 and is being fully financed from the existing liquidity of Porsche.

As a direct result of the increase in shares, and the fact that Volkswagen’s interest in Scania exceeds the statutory threshold of 30 per cent of all voting rights, Porsche acquired indirect control of Scania according to Swedish takeover law. The Stuttgart-based company was therefore obliged to announce a mandatory offer for those Scania shares that are not under its direct or indirect control.

In light of this, the mandatory offer extends to all Scania shares which are not held by Volkswagen or any other company directly or indirectly controlled by Porsche.

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