Executives from the troubled automaker were locked in eleventh-hour negotiations, trying to stave off bankruptcy. Seeking to refinance debts, win extensions on loans and borrow money, they talked with some of the country's largest banks - who weren't willing to extend more credit. Even the nation's leader got involved, calling bank executives who had sought government assistance during the recession to argue the automaker's case. In the end, bankruptcy was narrowly averted. For now. An early June deadline looms, when the company could still go under.
Another chapter in the General Motors saga?
No. This was Porsche.
The storied German automaker is barely scraping by, and may not make it through 2009. And while the details of Porsche's story don't match what has sent GM and Chrysler into bankruptcy protection, the root cause is the same: no one is buying cars the way they did just a few years ago.
Porsche's story helps to illustrate the global nature of the problems that have affected GM here at home. Both GM and Porsche face a mountain of debt. Both have sought government assistance. And both are struggling to sell cars in a market deeply scarred by the global recession.
Debt Up to the Wheel Wells
Like GM, Porsche faces tense negotiations with creditors over billions in debt.
Porsche's troubles began with an ambitious attempt to take over a much larger company. While Porsche had been one of the more profitable automakers in the world throughout most of the previous decade, it was dwarfed by Volkswagen, Europe's largest automaker. VW made cars in every market segment, from tiny inexpensive Beetles to luxurious Audis and million-dollar Bugattis. But the two companies had a long history together, sharing some of the same founders and early designers, and Porsche was flush with cash.
The company made a dramatic bid to buy control of Volkswagen in 2008, at one point owning more than half of the circulating VW stock with options to buy another quarter. But Porsche took on a great deal of debt to make the purchases, and its hunt for shares to buy sent VW's stock price soaring, ultimately out of reach of the heavily-leveraged Porsche.
In March of this year, Porsche finally admitted that it was in dire straits, uncertain of its ability to make its debt payments. Details of the meetings that month are sketchy, but participants have told German media sources that at one point, Porsche proposed selling all of its carmaking businesses to VW in exchange for cash to pay down debts - in the ultimate reversal of the takeover plan, Porsche would become just one of the ten Volkswagen brands.
That didn't happen, but VW did float Porsche a loan - the equivalent of about $1 billion - to help it hold off some creditors.
The two companies recently issued a vaguely-worded statement promising to form a partnership, but the legal parameters of the deal are not clear. They may merge, but a power struggle for control of the combined company means nothing is certain
Begging for Government Help
Like GM, Porsche has sought government assistance with its troubles. So far, the automaker hasn't actually borrowed government money to pay off its debts.
But German news magazine Der Spiegel has reported that Porsche leadership is considering the option. The German government has set aside a $156 billion bailout fund, which has primarily made loans to troubled banks. In mid May, Der Spiegel claimed that Porsche was close to applying for a loan from the fund.
Porsche hasn't applied yet, but shortly before VW saved Porsche with its loan, German Chancellor Angela Merkel reportedly called leaders of some of the banks that hold Porsche's debt, encouraging them to refinance or grant extensions on existing loans - buying Porsche a little time.
Crashing Sales Numbers
Porsche, like GM, is facing its debt crisis in the middle of the worst automotive market in decades. Like almost every other automaker, the company saw sales rise dramatically earlier in the decade, as successful Americans bought more and more expensive cars. Porsche even expanded its lineup, investing heavily in SUVs to the dismay of some longtime Porsche fans.
But, with the burst of the housing bubble, auto sales have fallen off dramatically - and Porsche is faced with a larger vehicle lineup in a time when fewer and fewer customers are willing to invest in an expensive set of wheels.
Here in the U.S., the company sold 25 percent fewer cars in 2008 than in 2007. So far in 2009, the news is worse, with sales down about 30 percent below the already low 2008 numbers. The U.S. is Porsche's largest market, but the news is little better overseas.
Deadlines in June
Like GM, Porsche may face its day of reckoning in June. And though VW saved the company in March, it may not be able to help this time. Ironically, VW's own struggles to sell cars may drag Porsche under.
Many of the banks that floated Porsche loans in recent years hedged their risk by buying shares in VW. Under German law, options on stocks mature on the third Friday in the months of March, June, September and December. That means the next opportunity for banks to unload their shares of VW is June 19. Some analysts expect the banks to look at the crashing automotive market, cut their losses and get out if they fear that sales won't recover.
If enough of them act at once that day, the price will crash - and Porsche's largest asset now is its share of VW.
Some auto industry observers expect the final merger agreement between VW and Porsche ahead of that date - or Porsche may find itself unable to pay its debts again, and out of political favors.
The forces that have pushed Porsche to the brink of bankruptcy are not identical to those that dragged GM there. Porsche's overreaching attempt to buy VW isn't the same as GM's excessive labor costs, oversized dealership network and overgrown product line. But both companies have faced critical negotiations over billions of dollars in debt, appeals for political help, and judgment days in June.
And, above all, both are struggling to sell cars in a recession after a long period growing fat on inflated sales. If a rising tide lifts all boats, then an ebbing tide lowers them all as well.