Porsche Challenges German Government Over Volkswagen Voting Rights
By CARTER DOUGHERTY International Herald Tribune
<div class="timestamp">Published: August 15, 2006</div>
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FRANKFURT, Aug. 15 — Porsche paid 3.3 billion euros ($4.2 billion) for a stake in Volkswagen, Europe’s largest automaker, nearly a year ago. Now, the luxury car manufacturer wants a voice in the company equal to its investment — even if it means driving the German government out of the car business.
Porsche’s chief executive, Wendelin Wiedeking, has said that he was examining whether his company could join a lawsuit by the
European Commission challenging a German federal statute that guarantees the state government of Lower Saxony a veto over major decisions at Volkswagen.
Although Porsche is now the largest shareholder in Volkswagen, Lower Saxony still has the most say because of the law, which blocks any shareholder other than the state from exercising more than 20 percent of the voting rights in the company.
Porsche now owns 21.2 percent of Volkswagen’s stock, with an option to buy an additional 3.9 percent. The state of Lower Saxony has 20.75 percent.
Porsche said last fall that it had amassed its stake in Volkswagen to guard against a hostile takeover of an important partner, which manufactures the chassis for the Porsche Cayenne sport-utility vehicle.
No such takeover is possible as long as the Volkswagen law is in force. But Porsche now says the law is unnecessary and, indeed, an irksome restraint on its own ambition to exercise greater influence over the company.
“We want to take full advantage of our rights as a shareholder,” Mr. Wiedeking told a group of journalists recently.
Though Porsche’s involvement with Volkswagen, which also owns the Audi, Skoda and Lamborghini brands, is a tale with plenty of odd twists, Mr. Wiedeking has opened an intriguing — some would say slightly baffling — new chapter. He may not get immediate satisfaction, but he is digging in for a long fight at one of Germany’s flagship companies.
On its face, there is little practical meaning to Mr. Wiedeking’s statement about joining the European Commission’s lawsuit: Gitte Stadler, a spokeswoman for the
European Court of Justice, said there is no provision for private parties to do so. Nor, apparently, has Mr. Wiedeking made any dent in the ironclad resolve Lower Saxony’s premier, Christian Wulff, and other politicians to to hang on to the state’s position in Volkswagen.
“The state government has always fought for the continued existence of the V.W. law, because it guarantees good development for Volkswagen and secures the interests of its operations in Lower Saxony,” said Mr. Wulff, who like Mr. Wiedeking is a Volkswagen director.
But more broadly, Mr. Wiedeking is opening a debate about the future of the company after the Volkswagen Law, which most legal experts expect will be overturned by the court challenge. And analysts say he is putting Porsche in position to prevent others from taking over the company and to speed an overhaul of Volkswagen that is already underway.
“Wiedeking will look to open an attack on all possible fronts, and you can expect more from his direction,” said Ferdinand Dudenhöffer, the director of the Center for Automotive Studies in Gelsenkirchen. “Porsche is sending a message that it wants to have the final word.”
Albrecht Bamler, a spokesman for Porsche, declined to elaborate on the motives behind Mr. Wiedeking’s statement. But it was no accident, analysts said, that he made the remarks to a group of German newspaper editors on Aug. 3.
Mr. Wiedeking appears to have engineered a turnaround of sorts within the two families that, between them, control all the voting shares in Porsche, the Porsches and the Piëchs. Ferdinand Piëch, the present chairman and former chief executive of Volkswagen, was a longtime supporter of the Volkswagen law; he is also a director at Porsche.
Porsche has also obtained advance approval from German antitrust authorities to exercise the options it holds and increase its stake in Volkswagen to 25.1 percent — enough to block any major decision under German corporate law, but only if the law is repealed and Porcshe can vote all its shares.
Porsche and Volkswagen officials expect a decision from the European Court of Justice, which is based in Luxembourg, sometime in late 2007, though appeals could drag on for years after that.
The European Commission’s challenge to the law argues that it violates
European Union rules that require equal rights for shareholders.
Analysts said that Mr. Wiedeking may have in mind the battle between Germany and the commission over the Landesbanken, a cosseted financial institutions that until last year enjoyed state guarantees for its debt. In that fight, which lasted a decade, the state’s long defense of the guarantees, which were ultimately overturned, had the effect of delaying the bank’s adoption of new business models that did not depend on state support.
Erika Mann, a Social Democratic member of the
European Parliament from the area around Volkswagen’s main plant in Wolfsburg, said that Mr. Wiedeking has gotten people thinking about life after the Volkswagen law. Ms. Mann, who supports the law, said that realism must dictate the best course of action.
“A fallback strategy is not a bad thing,” she said. “A bad thing would be to be surprised, and not to be prepared. To go into endless court battles would be the worst of all worlds.”
Indeed, from the perspective of investors — and Porsche is the company’s biggest — the last thing Volkswagen needs is to play a waiting game.
Volkswagen’s chief executive, Bernd Pietschetsrieder is struggling to put through a painful overhaul of the company’s operations that could affect up to 20,000 jobs. But its unions — powerful allies with Lower Saxony’s politicians in efforts to keep jobs in Germany — are resisting many of Mr. Pietschetsrieder’s proposals, and their opposition has been a drag on Volkswagen’s stock.
“Even if the actual effects of Porsche’s efforts are minimal, they need to slowly raise the shareholder friendliness” at Volkswagen, said Jens Schattner, an analyst with Dresdner Kleinwort in Frankfurt.
Still, Porsche may yet provoke an intra-German clash.
The state of Lower Saxony is said by the German press to be considering how it might increase its own stake in Volkswagen to 25.1 percent, the same blocking minority position that Porsche seeks. Matthias Sickert, a spokesman for the Lower Saxony government, declined to confirm the reports, but pointedly refused to deny that such preparations are afoot.
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Edited by - mpollard on 08/15/2006 3:42:18 PM
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