The deal serves to show just how powerful and profitable lithium-ion producers like BYD are going to get in the coming years – VW is having to partner with a number of companies, including BYD, Sanyo and Toshiba, just to be able to source enough batteries for its electric cars. No-one can produce these things fast enough at the moment, but once someone does, they’re clearly going to be unimaginably massive – one estimate puts the 2030 market at $150bn. BYD are well placed to take an early lead, but the US is keen not to be left behind – the government has been courting applications for $2.4bn in federal funding for developing battery production facilities.

BYD’s actual cars have been selling well, with a 143% increase in year-on-year sales of its F3 model. It came to greater Western attention when the twinkly ukulele-wielding investment oracle himself, Warren Buffett, bought 10% of the company last October. It’s a decision that his Berkshire Hathaway partner Charlie Munger defended at the Berkshire shareholder retreat last week (or “Woodstock for capitalists” as Buffett dubbed it), saying it wasn’t a speculative venture capital investment, but in something that was small but with big ambitions.

BYD’s founder and chairman, Wang Chuanfu, certainly has the work ethic to make it a success: “Maybe in the Western world, life is number one and work is number two, but in China, work is number one and life is number two. I enjoy working very much, if you ask me to go sightseeing for a day I probably wouldn’t enjoy it.” He works seven days a week, every week. Suddenly Bad Idea’s bank holiday weekend seems like a personal weakness.

BYD has got embroiled in some mild controversy, with one of their rivals, Taiwanese company Hon Hai, accusing them of stealing trade secrets, but BYD are denying it, and Berkshire’s Munger is relaxed about them: “That set of claims, in my view, has been totally discredited. I don’t have any ethical concerns about BYD.”

BYD use iron-phosphate-based lithium ion batteries, which are safer and mean your car isn’t prone to bursting into hot metallic flames; they will be heartened then to note this bit of research by MIT, who have pioneered a kind of iron-phosphate lithium ion battery that can be charged in 20 seconds, equally without blowing up, hot metallic flames etc. The one thing about petrol is that it works straightaway – no matter how green or cost-effective in the long term the electric car might be, consumers will only get on board if they’re convenient, and so getting recharging times down is surely a key detail.

Something tells me that the UK’s £250m of funding in general electric car-ness won’t go very far towards getting us any of this pie. It’s not like we don’t have either the manufacturers – there’s an association of them in fact – and there’s also some quality research being done, like the air-fuelled battery being researched at St Andrews University. Let’s hope we don’t end up missing out on the manufacturing opportunity of the century.

Talks that were meant to go ahead today have been postponed indefinitely, with this sniffy quote from VW’s spokesman: “Before we can take up talks again, it is necessary that Porsche adopts a clearly constructive attitude toward them”. Ooh, meow! Porsche took on €9bn of debt to fund the shares buyout of VW – now their cars aren’t proving a popular choice in a recession, they look a little precarious, and VW doesn’t want to end up bailing them out by hopping into bed with them.

Last week VW’s Ferdinand Piech said that Porsche must trim its debt before a merger could be considered; he dubbed a figure of €11bn for VW to buy Porsche as “definitely a few billion too high”. Porsche are concerned his remarks have been harming the company; he’s also set to hurt some feelings too, as he’s the grandson of Ferdinand Porsche, the founder of the company. Meanwhile Martin Winterkorn said Porsche needed to be more transparent about their financial status before talks could continue.

Porsche are saying the talks will continue as planned, as its obviously in their interests to have the protection of the bigger company during the recession. But VW obviously has the right to be cheesed off – if Porsche couldn’t afford the VW shares, then why did they heavily leverage themselves to buy them, and draw VW into their financial difficulty? Apart from some kudos and a slick museum, it’s hard to see what Porsche can really bring to the table. But both Porsche and VW are down in this morning’s trading - they’re going to have to sort something out, before a loss of confidence drags them both further downwards.

A quick recap: various hedge funds bet on a fall in VW’s share price last year, when Porsche revealed that – tada! – it actually owned the company after a creeping acquisition. Suddenly there were much fewer shares than previously thought, and the price was driven up 400% through a mad dash for them, so not quite the fall they predicted. The fallout was that VW staff cashed in their shares and sailed off into the sunset, Adolf Merckle lost so much he killed himself, and Porsche denied any manipulation of the market, though obviously their new acquisition has performed nicely out of this debacle – Porsche made €6.8bn from VW options trading, compared with €1bn from cars driven down Kings Road by guys called Stefan and Ollie.

The hedge funders are incensed, and are now having a mother’s meeting at their trade body AIMA to start “exploring what options might be open”, i.e. “let’s try and sue their asses off”. No actual lawsuits are expected until the summer, as the funds are waiting to see if Bafin, the German financial watchdog, condemns Porsche for manipulation, but they’re expected not to.

Porsche’s revenue sank 13% in the last six months, so they’re targeting the crucial “emissions-conscious, ugly-SUV fanatic with a £40,000 budget” demographic that is so coveted during a recession, with their diesel version of the somehow simultaneously bland and obnoxious Cayenne. Their other development is the Panamera, which thankfully goes back to their “sweet fruity cocktail + exotic destination x Italian phonetics” naming formula, but unfortunately looks like a frowning, self-hating Aston Martin dreaming of being a cheap Toyota. “Porsche considers itself well-armed to withstand a very difficult operating environment,” the company said. Well, just as long as they keep playing the markets – their cars don’t look ready to do it.

You may remember that Porsche revealed that it owned the majority of the common stock of VW, sending the price of the rest through the roof (with VW staff cashing in their personal stakes and presumably buying really nice summer houses). This wasn’t what some hedge funds thought would happen – fair enough, considering the state of the car industry post-recession – and they lost big through short selling. One of the biggest losers was Adolf Merckle, who went on to commit suicide amid the ruins of his business empire.

Now the fact that this trade by Porsche wasn’t the only time they’ve played the markets to their advantage means that their opponents are calling them a speculator rather than a company, potentially adding weight to allegations of market manipulation, over which Porsche are already being investigated by financial watchdog Bafin.

Frankly, it sounds awfully like sour grapes from the loss-making hedge funds, though they may have the last laugh even if their legal challenges don’t amount to anything. It’s not known how heavily Porsche is leveraged over their acquisition of the VW stake, but we do know they bought the shares at €117 each. That looks favourable when you see that the current share price is nearly €250, but compare it with that of other European car companies this morning: Renault: €16.33. Peugeot: €14.68. Fiat: €4.38. As the FT notes, VW haven’t ruled out a loss for the first quarter – their own sales are faltering, Audi sales are down, Porsche too, with only Skoda proving a success over the last couple of quarters. Give them a year or so in the current climate, and that share price could easily dip below what Porsche spent.

Porsche were legally obliged to buy out Scania after the VW buyout, but that deal has gone through without a hitch – they’ve passed on the shares to VW for the same price they bought them for. What’s more worrying is having to sort out the refinancing of a €10bn loan in less than a month, which even if they manage they’ll still face major increases to their rates of interest, which they’ll pay for… how? 

According to an analyst that the FT spoke to, Porsche had €31bn in stock liabilities last summer. Considering they’re dealing in a product that people are buying a lot less of these days, they could be the next company to have overextended and overexposed themselves at just the wrong time. Still, at least they can go and look back on the good times in their new museum. I can see their CEO Wendelin Wiedeking stumbling around it at night, drunk and Kane-like, stroking an 80’s 911 before shouting incoherently about oil prices and recession…

While Reuters gets all po-faced and semi-poetic (“On Tuesday pale blood stains still dotted the snow along the railway track where he died. The area looked deserted apart from a police car nearby”), let’s look not at his death itself but rather at a rather cruel juxtaposition of events today, considering the circumstances of Merckle’s downfall.

What really stung his businesses was a hedge on the price of VW shares going badly wrong, making a massive loss after Porsche revealed that they were well on the way to owning 75% of VW and spiking the share price; Merckle had hedged on a fall, and lost big. Previously Porsche announced its employees were making out like bandits from selling their shares, just as Merckle was entering talks and putting up his personal fortune as collateral; the two companies’ fortunes bifurcated even more sharply today, as while Merckle’s family mourn and try to save their family business, Porsche increased its stake in VW to more than 50%. It must now make a bid for Swedish truck manufacturer Scania, 69% of which is owned by VW; it’s also challenging, in the European courts, the block on it owning 20% of the company currently owned by the state of Lower Saxony. 

Not that Porsche is being crass in doing this, but the fallout from that one share announcement is astonishing. It’s testament to the strain placed on companies by highly leveraged speculation, and the potential enormity of gains and losses, both financial and emotional, from playing with such high stakes. If Merckle’s death can bring anything, it’s a moment of sobriety and reflection from those dancing between the poles of absolute poverty and unimaginable wealth, who often, as Merckle had, have a thousands-strong workforce relying on your judgement. I don’t want to do a Time and suggest that Merckle’s death symbolises or means anything outside of a personal tragedy, but I think it’s inevitable that he will come to represent the end of wild hedges, as the fund industry contracts and the party of the last few years comes to a sad end.

You may remember that Merckle was murked by short-selling shares in VW, which then skyrocketed after Porsche revealed they owned much of the company, thus losing Merckle, and many others who similarly hedged wrongly, hundreds of millions of euros. Porsche got criticised by some in the financial community, generally the hedge funders who lost big and presumably smashed up their own Porsches in acts of misplaced retribution.

So Merckle won’t be heartened to know that, in a moment of glorious financial symmetry, VW’s employees have made hundreds of millions of euros in selling their shares during the price spike. The board members themselves got in on the action, making €25m between them; meanwhile Merckle is having to dip into his personal fortune to help provide collateral to banks. God, that’s got to hurt.

VW has sensibly tried to morally legitimise this shameless exploitation of good fortune/share manipulation, with the executives announcing that they’re giving 10% of their windfall to charidee, helping little kinder in Wolfsburg where VW is based. Not sure that’s enough – I think you’d need to pay Wolfsburg’s college education and provide free school milk to prevent the inevitable howls of rage over the next few days. Yes, this truly is a classic week for unconvincing PR from major car manufacturers.

I like this bit of padding from the FT when they reported this story today: “The windfall for VW senior management is likely to create political controversy in Germany, where executives of large listed companies are commonly criticised for earning big bonuses”. I think that’s more of a non-Germany-specific thing really.

With consummate German efficiency, WEM issued a three-word statement today: “Negotiations are continuing”. From that we can deduce they haven’t got any money, and whoever’s going to give them some is playing hardball, considering negotiations have been going on since the 20th, when Merckle had to give banks guarantees from his personal fortune after VEM stock plunged. Among the banks involved in this charmingly personal bailout are RBS – must be nice for them to be on the normal side of a deal once again.

Merckle has hopefully avoided the papers today lest he become enraged at the sight of Wendelin Wiedeking, chief executive of Porsche, saying he had nothing to do with the massive inflation of VW’s shares, and it was all the fault of the hedge funds for running short. You will remember that Porsche quietly bought a lot of shares in VW, and then announced that it effectively owned it, causing the remaining 5% of shares to rocket in price and send Porsche’s profits similarly skyward, while those like Merckle who had bet on continuing falls lost big. But Wiedeking has said that to blame Porsche is absurd – after all, they want to increase their stake in VW to 75% soon, and they can’t do that at the current price.

Wiedeking joins Essex council today as people acting like benevolent socialist Care Bears, by pointing out that it’s been paying suppliers in advance, in order to bolster their liquidity in these times of crisis when the mean old German government won’t help them out. With banks refusing loans while trying to maintain minimum reserves, he warned that many healthy companies could go out of business very quickly without them: “We need banks to give credit, not just talk about credit ratings but start real actual lending to companies. These rules are choking us today. Stabilisation of the financial system has to take place rather than banks shifting hundreds of billions of euros to the European Central Bank to earn interest. They should be injecting money so healthy companies survive.”

I love that during this crisis everyone’s on their soapbox, but because no-one knows the answers, titans of business are flexing their political muscles and everyone’s actually listening. Of course Porsche have a vested interest in supplier chains staying strong, but isn’t this all a bit of a PR-pampering exercise from Wiedeking? Porsche goes from producer of CO2-burping twatmobiles to champion of the little guy – just the sort of image boost they need just as no-one can afford their product anymore.

Only 18 hours now Merckle! Boop beep boop beep…