By on November 24, 2011

Suzuki’s suit against Volkswagen had precision timing. Or was very lucky. Volkswagen is heavily distracted by another suit, namely the EU Commission against the Federal Republic of Germany. Casus belli: The VW law. As indicated last week, Brussels is dragging Germany in front of the European Court of Justice. Brussels demands that the “special treatment” for Volkswagen is to be dropped. If the suit is successful, and if Germany remains obstinate, then a penalty of at least €46.6 million ($62.2 million) is demanded. A bargain, considering the hundreds of billions which are being moved around to avoid a meltdown of Europe. The fine would have to be paid by the German government, not by Volkswagen, writes Automobilwoche [sub]

Volkswagen’s home state of Lower Saxony is holder of 20 percent of Volkswagen shares. The state has a veto right, courtesy of the VW law. That veto right protects Volkswagen from unwanted takeovers. Usually, such a veto right needs 25 percent, and Brussels insists on putting Volkswagen and Germany in compliance.  The suit triggered an onslaught of angry invectives from Germany. Said David McAllister, prime minister of Lower Saxony:

“At a time when the European Commission should be courting people for greater acceptance, it kicks off a completely unnecessary contract-violation procedure. The timing of this is grotesque.”

McAllister, member of the Volkswagen supervisory board and also a member of the ruling centrist CDU party, finds himself in unusual solidarity with the left-leaning unions. Hartmut Meine, boss of the IG-Metall union in Lower Saxony, rants:

EU Internal Market Commissioner Michel Barnier is a neo-liberal arsonist. He is trying to eliminate the successful model of enhanced co-determination at Volkswagen for pure ideological reasons. He wants to distract from the true problems in the EU.”

The timing indeed is peculiar. Currently, all attention should be on avoiding a crash of the European financial markets that would make Lehman look like a minor mishap. This needs the full attention and cooperation of all European governments and the EU commission. Picking a quarrel at exactly this point in time is more than grotesque.

 

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8 Comments on “While A European Meltdown Threatens, Brussels Sues Germany Over 5 Percent Of VW...”


  • avatar
    bumpy ii

    Remind me: did Suzuki buy more or less than 5% of VW shares when they were flirting?

    • 0 avatar
      mike978

      Suzuki has around 1.5% of VW. I agree with Bertel that the EU commission have better things to be doing. $62 million would also be pocket change if that is all this ends up costing them.

  • avatar
    timmruss

    I get quite a kick out of your pavlovian responses when it comes to your old owner Bertel :D

    Similar to your “objective” and “impartial” posts in the past when it comes to german makers, VW in particular.

    Thanks for the exceptional journalism, that contradicts the rest of the TTAC team.

    (And this comes from a guy who has a manual 2009 535i and a 2007 X5 in his garage)

    Cheers

  • avatar
    Manic

    So Lower Saxony needs to buy additional 5% of VW everything to be fine for Brussels bureaucrats, say block of shares from other owners e.g Suzuki? Surely L-Saxony can ask VW to organize targeted share issue so this rise to 25% ownership will happen, no?

  • avatar

    The EU Commission and everything below is one of the worst political organizations worldwide.
    Have a look at those guys/girls: their number one qualification is that they have proved to be useless in their respective home countries (kind of B-movie actors). They then get into power via a totally obscure process (if you want to call mafia-style background deals a process) compared to which a papal election is grass-roots democratic.
    So now you have them there. Still feeling important. Still feeling forced to save the world, e.g., by banning light-bulbs, by issuing fully-idiotic guidelines aiming at the protection of beer-garden waitresses (those with a décolleté), construction workers, farmers, etc. from the destroying powers of the sun. This, after we have proof of successful farming with sun exposure (thank God) for several thousand years BEU (before EU).
    There is not one EU guideline that makes sense or isn’t stating the obvious.
    So, nothing new here.

  • avatar
    daveainchina

    This is just one department doing something that seems in conflict with another department.

    These government type agencies are big enough to do both at once. I don’t see the problem other than bad publicity. We do it in the USA too.

    /shrug

  • avatar
    th009

    This is mainly an issue for the State of Lower Saxony, right? Does VW (read: Herr Piech et al) really care whether this law exists or not?

    • 0 avatar
      Fusion

      VW cares because the workers care. The state “ownership” and the veto-right quite effectively protected VW from hostile takeovers, and the assured seats to lower saxony (in the old VW law!) basically gave the employee-site the majority in the supervisory council.
      The workers care -> the unions care -> in a company like VW, that means the management cares. Quite a lot, at least verbally.

      Imho the VW-law by now should be of very little real interest to anybody, since the hostile takeover-chances are really low now anyway, with 90% of the voting rights distributed between the main shareholders – Porsche SE, Lower Saxony and Qatar.
      Also, I don’t think the chances of the EU-comission are that great this time.

      The last verdict basically stated that the right of Lower Saxony to always send two members to the supervisory board, regardless of its share in VW, is illegal. It has since been removed from the VW law and added to the VW statutes (which the EU has no control over).

      The verdict also stated that the combination of capping the influence of a shareholder at 20% and giving a veto-right with 20% was illegal. It explicitly said that each rule by itself might not be against EU-regulations, but the combination is.

      “56 It must therefore be held that the combination of Paragraphs 2(1) and 4(3) of the VW Law constitutes a restriction on the movement of capital within the meaning of Article 56(1) EC.”

      Since then, the 20% cap on voting rights has been removed. By now the VW law basically only contains a 20% veto right instead of the usual 25% veto right, and a 2/3 vote when deciding about plant relocations/building/closings. (The last part has never been questioned, and also since then put into the statutes).

      While VW really doesn’t need to care about the result (as stated, this is a court case against Germany, which would have to pay), I am not so sure that the court will decide against the Law as it did in 07…


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