Volkswagen becomes world’s most valuable automaker (for now)

Volkswagen, which recently introduced its Routan, a rebadged Chrysler minivan, has passed Toyota to become the world’s largest automaker by market value.

While the European Dow Jones Stoxx 600 Index was hit yesterday with its worst loss in 21 years, VW was one of just four stocks included in Index that rose. It’s now the best-performing stock on the continent.

The situation is not expected to last. Volkswagen, while profitable, benefited most from hedge fund investments and the collapse of Lehman, which had a brisk business in loaning VW shares to short sellers. The short sellers expected VW shares to decline on the basis of Porsche’s plans to take over the Wolfsburg-based car company. When it came time to redeem their positions, they were caught in what market experts call a “short squeeze.” In the process, VW’s stock value become disconnected from the company’s actual value. Most European analysts recommend selling VW stock now as it is overvalued.

In other financial news, Citigroup downgraded both Ford and GM to “sell” from “hold” today.