The families that own Porsche SE have not yet agreed on a strategy to cut the automotive group's debt and join forces with Volkswagen, Porsche's deputy chairman said on Thursday.

Dismissing media reports that the Porsche and Piech clans had finally settled a power struggle over Porsche's fate, Uwe Hueck said he had been promised by both families that they would make no decision before consulting Porsche's supervisory board.

His comments followed media reports quoting unnamed sources that VW Chairman Ferdinand Piech, a member of the extended clan, had won the battle by persuading the family to let Europe's biggest carmaker absorb Porsche's healthy sports car business.

That remains an option, Hueck told reporters, but added that he and Porsche Chief Executive Wendelin Wiedeking preferred to strengthen the group's balance sheet by issuing new shares and selling a stake to a Qatari investment fund.

Hans Michel Piech and Wolfgang Porsche have given me their word that the families will not decide anything without discussing it with the supervisory board, said Hueck, who is Porsche's top labor leader.

Hans Michel Piech is Ferdinand's brother and a Porsche board member. Their cousin Wolfgang Porche is Porsche chairman.

What those three decide behind closed doors will finally determine the shape of any deal. The families are contractually obliged to vote together on strategic issues.

The boards of both companies meet separately in Porsche's home town of Stuttgart on July 23, setting the stage for a showdown in the months-long saga over who will control the automotive juggernaut that would emerge from any merger.

Porsche had to abandon plans to take full control of its much larger peer as its debt mounted -- sources told Reuters on Wednesday its net debt has surpassed 10 billion euros ($14.09 billion) -- just as global car markets collapsed.

That left Porsche with a 51 percent stake in VW, which agreed on May 6 to enter talks on creating an integrated car group featuring 10 brands ranging from the mass-market VW marque to high-end Bugattis and Lamborghinis to heavy trucks.

Porsche, whose wholly-owned Porsche AG unit makes the famed 911 sports car, has been in talks for weeks with Qatar about selling a minority stake or a package of options that control 20 percent of VW shares.

Wolfgang Porsche and Hueck have repeatedly ruled out selling Porsche AG to VW. Porsche has said that would let creditor banks call a 10.75 billion euro loan it got in March.

VW declined to comment.

Porsche shares rose 3.2 percent and Volkswagen stock edged down 0.6 percent by 1026 GMT, lagging a 0.4 percent gain in the DJ Stoxx European car sector index.

Analyst Heino Ruland from Ruland Research said any deal that let VW buy nearly half of Porsche AG and brought Qatar on board as a big investor would boost Porsche's share price but hit VW.

VW common stock has been kept on artificially high levels due to takeover speculation and the fact that Porsche cannot afford lower share prices as it would provoke writedowns on its majority stake in VW, he wrote in a note to clients, but he refused to rule out another short squeeze in VW.

A short squeeze following news that Porsche controlled 74 percent of VW's votes briefly pushed VW shares above 1,000 euros in October, making it the world's most valuable company.

Sources close to Porsche told Reuters on Wednesday that the company aimed to raise 5 billion euros by issuing new shares to be subscribed by the owner families and Qatar, helping offset debts which have risen from 9 billion at the end of January.

Qatar would get voting shares in Porsche through the capital increase, while the families would receive voting shares as well as non-voting preferred shares in the company.

The plan includes Qatar taking over Porsche's derivative contracts that control around 20 percent of VW's voting shares, the sources said, adding the total package would provide around 10 billion euros in relief for Porsche's balance sheet.

(Writing by Michael Shields; Editing by David Cowell)

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