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Porsche Considers Legal Challenge to VW Voting Rights; Launches Complaint Over "Bugging"
28 Apr 08
Porsche has ramped up the pressure on Lower Saxony and German lawmakers as the police are called in over bugging allegations.
Global Insight Perspective | | Significance | Porsche has said that it is looking into the possibility of launching a legal challenge to reverse the vote at last week's VW AGM that retained the blocking minority of the State of Lower Saxony. Meanwhile, Porsche has also launched a complaint against alleged attempts to bug CEO Wendelin Wiedeking. | Implications | Porsche's willingness to consider legal action in its battle to alter the VW Law and VW's articles of association would indicate that we are entering the endgame in the sports car manufacturer's attempts to effect a full takeover of Europe's largest volume carmaker. | Outlook | Porsche is ramping up the pressure on Germany's lawmakers and the State of Lower Saxony who have so far resisted all attempts to alter the constitution of VW. Evidence that Wendelin Wiedeking has been bugged illustrates the stakes involved in the power struggle over VW. |
Porsche Looks to Up the Ante Porsche has said that it is looking into the possibility of launching a legal action to reverse the vote taken at last week's Volkswagen (VW) annual general meeting (AGM) to retain the blocking minority of the State of Lower Saxony. The state government of the locality that includes VW's main production centre, the city of Wolfsburg, holds a 20.3% stake in VW, which means it holds what is known as a blocking minority. This is the result of the VW Law, which is the piece of legislation that acts as the constitution for the ownership and running of Europe's largest volume carmaker. The VW Law says that any single shareholder that owns more than a 20% stake in the company has an effective veto over major management decisions involving job cuts, plant closures and production locations. The blocking minority is also enshrined in VW's articles of association and it currently stands in the way of Porsche taking full, unfettered management control of VW. Porsche currently owns a 31% stake in VW and is therefore the largest single shareholder. Porsche reaffirmed its determination at last week's AGM to turn this holding in a majority stake, something that it said would happen in either September or October of this year following regulatory approval from the European Union (EU). The EU has already stated that attempts by the German government and the State of Lower Saxony to retain the blocking minority are illegal and have also threatened legal action to have the clause revoked. Porsche may accelerate this process. Speaking to the Dow Jones International News at the weekend, an unnamed Porsche spokesperson said, "We reserve the rights to take legal steps," adding that Porsche had four weeks from the time of the AGM vote to launch an action. A Porsche proposal to lower the majority vote needed to cement major strategic decisions at VW to 75% from 80%, which would be in line with German corporate law, was voted down at last week's AGM, with the Porsche motion only attracting 60.49% of the votes at the meeting, while a counter proposal by Lower Saxony only won 42.75% of the vote (see Germany: 25 April 2008: Porsche Fails to End Blocking Minority at Fractious VW AGM). The World is Not Enough Meanwhile, the new James Bond film may currently be shooting in Italy, but one could be forgiven for thinking the plot had shifted to Germany after it was revealed that police are investigating a complaint by Porsche over the bugging of CEO Wendelin Wiedeking's hotel room when he visited the VW headquarters. According to a report in the Spiegel magazine on Saturday, a switched-on baby monitor was found behind a sofa in the room where Wiedeking was going to stay for a VW supervisory board meeting. Porsche spokesperson Albrecht Balmer said the company had filed a complaint with prosecutors in Braunschweig although he declined to elaborate. Porsche has also complained to the police that the phone of its workers council chief Uwe Hueck, has also been tapped. Outlook and Implications Porsche appears to be upping the ante in its attempts to get the legal structure of VW management controls changed. It has many weapons at its disposal; not least the ruling by the EU that the VW Law and German government proposals to alter the law are illegal. German corporate law also only requires a 75% voting majority to effect major strategic decisions. Therefore, the question has to be posed: why should VW be treated any differently and exist in a regulatory structure that is separate to German and EU law. Porsche therefore has the law on its side as well as huge amount of corporate might and the formidable managerial and shareholding power conferred by CEO Wendelin Wiedeking, Porsche's largest shareholder Wolfgang Porsche, as well as the immensely powerful Porsche family scion Ferdinand Piëch, who was CEO of VW up until 2002, and remains chairman of the company's supervisory board. The reports of bugging and phone-tapping would appear to be the stuff of a spy thriller, but they are indicative of the powerful interests that are in collision course in the battle for VW. There may be an innocent explanation for a baby-monitor left behind a hotel settee, but news of this incident will do nothing to dampen the atmosphere of fear, loathing and hostility that exists between some of the key players in this saga.
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