VW's takeover of Porsche would be scuppered by tax liabilities, according to a German newspaper.
The Sueddeutsche Zeitung newspaper quoted Porsche sources as saying that taxes of 3 billion Euros (£2.5 billion) that would go along with any takeover could become a deal-breaker.
The news follows reports that Ferdinand Piech is putting immense pressure on the Porsche family to sell a majority of its shares to VW and fire company boss Wendelin Wiedeking, a move which is likely to cost around £80 million in severance pay.
Porsche and Volkswagen declined to comment on the report. Both companies have scheduled board meetings this Thursday, with the fate of Porsche set to be decided then.
Insiders say VW wants to buy a 49.9 per cent stake in Porsche immediately, with an agreement to acquire the rest at a later date.
Porsche is reported to have debts of 14 billion Euros (£12 billion) at present, which it picked up in its abortive attempts to take over VW last year.
The news of the tax liabilities sent VW and Porsche shares plunging nine per cent and eight percent respectively.