VW shareholders to tangle over VW Law

AFP - [email protected] • 22 Apr, 2008 Updated Tue 22 Apr 2008 08:09 CEST
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For the first time since Porsche made it clear it wanted to take over Volkswagen, all key players will gather on Thursday for a general assembly of shareholders where fireworks are foreseen.

On one side is the Porsche family, headed by Wolfgang Porsche and Ferdinand Piech, united in their plan to acquire the biggest European auto manufacturer.

On the other is the IG Metall trade union, which represents more than 90 percent of VW staff, along with the state of Lower Saxony where VW is based and which owns just over 20 percent of the company.

The union and political leaders are worried about a possible revolution within the group, one of Germany's iconic industrial successes following World War II.

The stakes are high. Both sides want to shape the future of VW, which intends to become the biggest carmaker in the world.

Since it was created by the Nazi regime, VW has never been a company like the others. Run according to a law that bears its name, it was privatized around 50 years ago only on condition that significant worker rights were guaranteed.

Lower Saxony retained a minority blocking stake as well.

A model of German co-management, VW then turned out several models that made automotive history and are known worldwide, such as the Beetle, the mini-van and the Golf.

But times change, and the auto giant, which has more than 300,000 workers and also owns the Audi, Lamborghini, Seat and Skoda car brands in addition to Scania trucks, is set to be swallowed by a company much smaller than itself: Porsche.

The producer of the 911 sports car, said to be the most profitable carmaker in the world, is determined to make VW "a normal company", in the words of Porsche boss Wendelin Wiedeking.

He fervently opposes the "VW Law", struck down in October by the European Court of Justice, and wants to change VW's statutes at the meeting on Thursday in the northern port of Hamburg.

The German government however, is working on a new version of the law that would retain key provisions while addressing clauses specifically banned by the court's ruling.

One such measure requires that strategic decisions like plant relocations be approved by more than 80 percent of the shareholders, which gives Lower Saxony a virtual veto.

The state has already made it known that it would vote against proposed changes to VW's statute on Thursday.

"After the war, Volkswagen was destined to become a group owned by the people, with its shares distributed widely. There was not supposed to be a dominant shareholder," regional premier Christian Wulff said recently.

"That is why it should be possible to conserve a minority blocking stake," he added.

Representatives of IG Metall, which plans a demonstration on Thursday, will also vote against such changes.

Union representative Bernd Osterloh considers the Porsche takeover bid to be a hostile offer and wants to reach a "reasonable balance between a race for profits and job protection."

Porsche is therefore unlikely to get changes approved on Thursday.

"Nothing spectacular should emerge from the general assembly," commented Juergen Pieper, an analyst at the private German bank Metzler.

"These are only simulated skirmishes, rhetoric," he said. "In reality, it will be relatively easy for Porsche to get ahold of VW."

But German auto expert Ferdinand Dudenhoeffer, a Porsche partisan, said there could well be a major development in Hamburg.

"I am convinced that Porsche will announce Thursday that it holds more than 50 percent of the capital in VW," less than two months after saying it had begun to build its stake, Dudenhoeffer told AFP.

An announcement would not suffice to change the company's statues but would put serious pressure on those opposed to a takeover.



AFP 2008/04/22 08:09

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