The rumor about Porsche taking over Volkswagen is one of the longest enduring controversies in the auto industry. And with the additional shares purchased by Porsche at the Wolfsburg-based automaker will further strengthen the speculation of the rumored takeover. But how true is it?

Despite the additional shares purchased by Porsche at Europe's largest automaker a takeover is surprisingly has never been the objective of the German sports car manufacturer.

The shares of Volkswagen, Europe's largest automaker and producer of the popular range of VW head gaskets had rose and close at 5.24 euros ($6.96) or 6.5%, to 83.90 euros ($111.52) higher on Friday, after a report from Germany's Manager Magazin stating that members of Porsche's controlling Piech and Porsche families have purchased a third of Volkswagen's preference shares which means that they had likely gone higher than the 30% limit set by the German corporate law for the initiation of a full takeover.

But despite the announcement from Porsche that they will not be taking over Volkswagen, some analysts still believe that the families which include VW's chairman Ferdinand Piech have or will go beyond the set ceiling anytime soon.

According to Roman Mathyssek, Global Insight's senior automotive analyst, "The cost benefits of increasing the stake in Volkswagen are doubtful at the moment. This has to do very little with logic and that's why nobody believes it. From an industrial point of view there might be a good argument for the two companies to develop more products together, but you can do all that without increasing the equity stakes."

The earlier purchase of the 20% stakes of Porsche at Volkswagen in the year 2005 was viewed by most analysts as a defensive move geared at safeguarding Europe's largest automaker from any type of foreign takeover by hedge funds or by the likes of US corporate raider Kirk Kerkorian, who is a billionaire and president/CEO of Tracinda Corporation.

And from then on Porsche has been increasing its stakes reaching 27.4%. Chief Executive Wendelin Wiedeking announced just earlier this March that the company, Porsche is considering increasing its stake in Volkswagen to reach 30%.

Mathyssek said that the controlling families will not probably go beyond the 30% threshold not because they don't want to but they would like to first negotiate an exemption from the takeover law while waiting for Volkswagen's share price to drop significantly and once it does, "it wouldn't surprise me if they filed for an exemption (with the government) so that they can get a whole 40% or 50% and not have to launch a takeover."

About Porsche: Porsche AG or Porsche is short for Dr. Ing. H.c. F. Porsche AG is a German sports car manufacturer founded in 1931 by Ferdinand Porsche, the engineer who was responsible for creating the first Volkswagen. The company is headquartered in Zuffenhausen which is a city district of Stuttgart, Baden-Wurttemberg.

Porsche was awarded first place as the most prestigious automobile brand by Luxury Institute, New York in a survey conducted last May of 2006. At least 500 households with gross annual income of at least $200,000 USD and a net worth of at least $750,000 have participated in the said poll.

The current Porsche lineup includes sports cars starting from the Boxster roadster to their most famous product the 911. Another model similar to the Boxster is the hard top Cayman which has a slightly higher price range. The Cayenne is Porsche's mid-size luxury SUV. The Carrera GT Supercar was removed from the line up last May 2006. The upcoming lineup of Porsche includes high performance Panamera which will be offered in luxury saloon/sedan. Porsche was also the first to use variable geometry turbocharger in a gasoline powered production automobile.

Last 2006 J.D. Power and Associates awarded Porsche for highest Nameplate Initial Quality Study (IQS) of automobile brands. Porsche as a company is renowned for withstanding changing market conditions with its remarkable financial stability. Most of its productions are done in Germany unlike other German automakers that have moved their operations partly to Eastern Europe or overseas.