The two carmakers have come to an agreement whereby Volkswagen will buy a 42 percent stake in Porsche, in a deal worth up to US$4.7billion.

The deal is expected to be completed by the end of the year, and Porsche will be fully integrated into VW by 2011. Porsche however will operate as an independent brand, much like Bentley and Audi, but will share technologies and platforms across the Volkswagen Group.

The new company will be headed by current VW CEO Martin Winterkorn, and ends a long period of wrangling where Porsche attempted to buy over Volkswagen, but failed and ended up with debts of US$12billion and fired its CEO Wendelin Wiedeking.

The Auto Union name was first used in the 1930s, and referred to the group that was in charge of the Audi, Horch, DKW and Wanderer marques prior to World War II. It eventually evolved into Audi today, which retains the four-ring logo that the group used previously.