FRANKFURT -- Porsche Automobil Holding SE on Sunday said it had a near-75% stake in Volkswagen AG, a much larger stake than the market expected, and said it wanted to tighten its grip on Volkswagen with a so-called domination agreement that would give it access to Volkswagen's cash flows.

Porsche announced it had control of 31.5% of Volkswagen through cash-settled options in addition to the 42.6% of shares it currently holds, leaving it just 0.9% short of the 75% level needed to log Volkswagen's revenues and assets in its own books.

Previously, Porsche's Volkswagen stake was known to be 35.14% plus an undisclosed number of options.

"The target is to raise this to 75% in 2009, so long as the economic conditions permit, and pave the way for a domination agreement," Porsche said.

A domination agreement under German law requires the control of at least 75% of a company's voting rights at a shareholder meeting.

A spokesman for Volkswagen said the auto maker expected the move and continues to welcome Porsche's investment. Porsche said it disclosed the size of its stakeholding after it became clear that there were more short-sellers in the market than it expected, who now get the chance to clear their positions without any major risk.

Investors betting on Volkswagen's share price to fall have triggered huge share-price movements recently. The volatity of Volkswagen's shares was partly because of its small free float, as the German state of Lower Saxony still controls slightly more than 20% of the voting rights.
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A VW spokesman said the auto maker expected Porsche's move and continues to welcome its investment.

Porsche's announcement Sunday makes it clear that barely 5% of the shares are in free float.

Volkswagen's labor unions said they "fiercely oppose" Porsche efforts to achieve a domination agreement. "It would be a catastrophe for the more than 360,000 employees of Volkswagen if managers who trample on workers' rights take over control at this company," said Volkswagen's top labor representative and supervisory board member, Bernd Osterloh, in a statement.

Meanwhile, Porsche said Friday that the rift between its owners, the Pi Yahoo: porsche luxury car Porsche's Owners Will Support VW Purchase porsche luxury car Stock Number
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