Investors hungry for reform at Volkswagen after the diesel emissions test-cheating scandal may be disappointed at the carmaker’s annual shareholder meeting tomorrow.
Galvanised by hedge fund TCI, which launched an attack on Volkswagen’s (VW) corporate governance last month, some shareholders felt that changes to the company’s arcane structure were inevitable.
There were also signs of discontent among major shareholders with some members of the Porsche-Piech family indicating they might dispute the paying of a dividend at the meeting. But that appeared to have been resolved on Thursday after Volkswagen presented a 10-year strategy plan.
After decades in which Europe’s biggest carmaker appeared to be run in the interests of the Porsche-Piech clan that controls the company, Volkswagen’s more than half a million employees and its home state of Lower Saxony, the balance of power seemed set to tip towards institutional shareholders.
“VW can only develop further if the conflict of interest between unions, Lower Saxony, the ruling families and independent shareholders is resolved,” said Ingo Speich, a fund manager at Union Investment which holds about 0.6 per cent of VW preference shares.
A vote by the Porsche-Piech family would have begun to weaken the special status of Lower Saxony by giving all shareholders equal voting rights if the dividend were scrapped for two years in a row.
That would have eliminated the veto rights of Lower Saxony, with its interests in preserving local jobs, over major strategic moves such as shutting plants.
But the family closed ranks on Thursday after Volkswagen presented a strategy plan supposed to turn the company into a leader in electric vehicles and new forms of mobility such as ride-hailing and car-sharing.
“The agreement on the dividend shows that no significant changes are to be expected,” said Union Investment’s Speich.
Porsche SE, the family’s holding company for its 52 per cent stake in Volkswagen, said the clan no longer had any issue with Volkswagen’s paying a dividend, thanks to the plan that it said secured the company’s future.
In an interview with Germany’s Bild tabloid, Wolfgang Porsche and Hans Michel Piech – two senior representatives of the family on Volkswagen’s supervisory board – explicitly backed executive bonuses, chairman Hans Dieter Poetsch, and the new strategy, which it said was the only way to preserve jobs.
“We as a family are responsible for Volkswagen,” Porsche told the newspaper. “In this matter, our families, regardless of what generation, are absolutely unanimous.”
Legal risks
Volkswagen faces a variety of legal risks including civil claims from drivers and dealerships, possible criminal prosecution by the US Department of Justice and uncertainty about a proposed settlement with US regulators.
In the US, Volkswagen has until June 28 to reach a final diesel emissions settlement with US government regulators and owners of nearly 500,000 2.0 litre vehicles.
A tentative settlement announced in April includes an offer by VW to buy back nearly 500,000 polluting vehicles, as well as an environmental remediation fund to address excess emissions and a fund to promote green automotive technology.
VW will still face outstanding lawsuits by US states and talks with dealers to compensate them.
European lawyers say their clients deserve a similar offer to the potential US deal that includes buybacks or possible fixes at an estimated cost to Volkswagen of more than $10 billion (€8.8 million).
Bentham Europe, a litigation funder, has said it is in contact with Volkswagen’s top 200 investors about launching a damages claim in Germany for alleged negligence and breaches of German securities law.
Bentham Europe, a joint venture between Australian-listed IMF Bentham and US hedge fund Elliott Management Corp., plans to manage and fund a German claim on a “no win, no fee” basis, alleging in part that VW failed to publish market sensitive information in a timely way.