Volkswagen on Tuesday said it would pay 3.9 billion euros ($5.8 billion) to take a bigger than planned 49.9 percent stake in Porsche AG as a first step to a full merger with Porsche SE by 2011.
Europe's largest auto maker said it was making better than expected progress on cooperation projects between the two makers.
VW supplies components for about a third of all Porsche cars, including bodies of the four-door Cayenne and Panamera models and has sought to expand this cooperation.
Porsche had said in August said it would sell a 42 percent stake in Porsche AG, its healthy sports car business, to VW for 3.3 billion euros ($4.9 billion) as part of a multi-stage integration.
Porsche was forced to turn to VW for help after an attempt to seek control over Volkswagen backfired. Porsche had sought to buy VW so it could secure access to key components and technologies it needed to meet stringent new pollution rules, but took on too much debt.
Porsche took on more than 10 billion euros in debt to buy a 51 percent stake in VW and a package of derivatives for control over an additional 20 percent of VW stock.
Volkswagen shares were down 1.9 percent at 119.07 euros by 11:23 a.m. EDT (1523 GMT), while Porsche shares traded about 1.1 percent lower at 59.24 euros.
(Reporting by Edward Taylor)