While A European Meltdown Threatens, Brussels Sues Germany Over 5 Percent Of VW

Bertel Schmitt
by Bertel Schmitt

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.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Daveainchina Daveainchina on Nov 24, 2011

    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

  • Th009 Th009 on Nov 24, 2011

    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?

    • Fusion Fusion on Nov 24, 2011

      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...

  • ToolGuy Ford is good at drifting all right... 😉
  • Dave Holzman A design award for the Prius?!!! Yes, the Prius is a great looking car, but the visibility is terrible from what I've read, notably Consumer Reports. Bad visibility is a dangerous, and very annoying design flaw.
  • Wjtinfwb I've owned multiple Mustang's, none perfect, all an absolute riot. My '85 GT with a big Holley 4 barrel and factory tube header manifolds was a screaming deal in its day and loved to rev. I replaced it with an '88 5.0 Convertible and added a Supercharger. Speed for days, handling... present. Brakes, ummm. But I couldn't kill it and it embarrassed a lot of much more expensive machinery. A '13 Boss 302 in Gotta Have It Green was a subtle as a sledgehammer, open up the exhaust cut outs and every day was Days of Thunder. I miss them all. They've gotten too expensive and too plush, I think, wish they'd go back to a LX version, ditch all the digital crap, cloth interior and just the Handling package as an add on. Keep it under 40k and give todays kids an alternative to a Civic or WRX.
  • Jpolicke In a communist dictatorship, there isn't much export activity that the government isn't aware of. That being the case, if the PRC wanted to, they could cut the flow of fentanyl down to a trickle. Since that isn't happening, I therefore assume Xi Jinping doesn't want it cut. China needs to feel the consequences for knowingly poisoning other countries' citizens.
  • El scotto Oh, ye nattering nabobs of negativism! Think of countries like restaurants. Our neighbors to the north and south are almost as good and the service is fantastic. They're awfully close to being as good as the US. Oh the Europeans are interesting and quaint but you really only go there a few times a year. Gents, the US is simply the hottest restaurant in town. Have to stand in line to get in? Of course. Can you hand out bribes to get in quicker? Of course. Suppliers and employees? Only the best on a constant basis.Did I mention there is a dress code? We strictly enforce it. Don't like it? Suck it.
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