REUTERS

The Volkswagen logo.

Volkswagen is sticking with its planned merger with Porsche despite serious legal and tax hurdles, the German automaker said Thursday as it reported profits jumped to e3.2 billion ($4.46 billion) in the fourth quarter.

The complex merger - in which Porsche would become one of Volkswagen's 10 brands - was supposed to take place this year but has been held up by German prosecutors' investigations of suspected market manipulations at Porsche and a lawsuit in the US.

The deal “is taking ever clearer shape,” Volkswagen CEO Martin Winterkorn said at the company's annual news conference. “The preparations are going according to plan, Volkswagen stands as before behind the basic agreement and the merger with Porsche.”

“However, there are still not insignificant tax and legal hurdles to overcome.”

Porsche initially tried to take control of Volkswagen but ran into financial difficulties, and Volkswagen turned the tables with a merger deal that puts it in the driver's seat.

Volkswagen now owns 49 percent of Porsche's car making operations, and has an option to buy the rest. It is holding off completing the deal with Porsche's holding company - a different entity - while German prosecutors investigate suspected improper share dealings at Porsche, and the full merger may not be completed this year.

The Porsche holding must first issue new shares to reduce debt, and Winterkorn said that step “is still anticipated in the first half of this year.”

Meanwhile, Volkswagen's net profit for the fourth quarter was boosted by an expanding global automarket that lifted sales in the United States, Europe and especially China. The fourth-quarter figure compared with e257 million in net profit from the same period in 2009.

Revenues rose 22.5 percent in the quarter from a year earlier to e34.33 billion.

Top contributors were the Volkswagen brand, which raised its operating earnings to e619 million from e225 million a year ealier, and the Audi brand, which turned in e1.07 billion in operating earnings, up from e432 million. Operating earnings omit financial items such as interest and taxes, but are a common yardstick.

Volkswagen's other brands include SEAT, Bentley, Lamborghini, and Skoda.

The company has already announced profit of e6.84 billion for the whole of 2010, which it calls its most successful ever.

Volkswagen shares traded down 1.8 percent on the day at e107. - Sapa-AP