The two big car companies will combine to put 10 brands under a new German vehicle group
The decision comes after weeks of talk between luxury car company Porsche, and European best-seller Volkswagon.
At a meeting in Austria yesterday, Porsche argued for "the creation of an integrated car manufacturing group" where 10 seperate car brands would come under an "integrative leading company".
Volkswagon praised the decision of Porsche and its family of owners.
A statement said: "On this basis, both companies Volkswagen and Porsche intensify the talks in a joint working group with the relevant involvement of the State of Lower Saxony as largest co-shareholder as well as the employee representatives of both companies. It is the aim to develop a corresponding basis for decision-making on the future structure of the common group within the next four weeks."
Stuttgart-based Porsche already holds a majority stake in Volkswagen and made a takeover bid for it three-and-a-half years ago.