Earlier this month, Porsche increased its standing as the dominant shareholder of Volkswagen, Europe's largest auto-maker, from 31 to 35.14%. Porsche's increased holdings guarantees the firm a "permanent majority at the VW general assembly," and it intends to eventually control in excess of 50% of Volkswagen stock.
The structure of German securities law enables Porsche's 35% holding to subordinate Volkwsagen to an "effective" unit of Porsche, despite the fact that Porsche is the smaller of the two auto-makers. Indeed, Porsche employs roughly 11,000 workers and manufactures approximately 100,000 vehicles, compared to Volkswagen's 300,000 strong workforce and six million annual new cars.
Porsche is also required by statute to submit a formal offer to acquire Audi AG, a Volkswagen subsidiary. The mandatory offer must be filed with the German Federal Agency for Financial Services Supervision by mid-October.
Porsche faces additional challenges to its interest in taking an increasingly dominant role in Volkswagen over the coming months and years. Government entities seek to maintain a sizeable minority in the company and some executive officials in Volkswagen are resistant to further Porsche control.
The German state of Lower Saxony control a combined 20% of Volkswagen stock. A special law guarantees Lower Saxony veto power in Volkswagen matters, effectively functioning as a blocking minority in the Volkswagen general assembly. However, the law has recently come under fire by the European Commission's anti-trust regulatory body, the European Commission. Regulators have sought to undo the law on the basis that it unlawfully restricts the free flow of capital and is thus anti-competitive. The European Court of Justice ruled to strike it down last October, but the ruling is on appeal.
Trade unions are extremely powerful in Volkswagen, and they are insistent that the special suite of Volkswagen laws, including government ownership and labor policy, remain on the books. Shortly after Porsche acquired the additional shares earlier this month, union official organized a 40,000-strong worker walk-out to demonstrate their intent to see that Volkswagen maintains its commitment to working with organized labor. Furthermore, Volkswagen's works committee has an express interest in limiting Porsche's influence of VW and is actively seeking to maintain its operational control.
Additionally, VW recently unveiled new codes of conduct which state that employees only need to share VW information with Porsche as it relates to necessary financial information. Porsche may be provided information outside of the guidelines - about troubles facing Volkswagen, for instance - but may be required to provide additional compensation or concessions, according to the German magazine Capital.
Porsche first acquired a 20% interest in Volkswagen three years ago and hopes to acquire 50% control in the foreseeable future.
Porsche is among the world's most profitable car design and manufacturing firms, and analysts predict that further consolidation with Volkswagen and Audi will permit even more flexibility and efficiency in production in emerging areas such as hybrid engines.
About the Author
About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.
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