Tension in Volkswagen Subsides, Wulff Prepares for a New Battle

In Germany: For the past couple of months, the German public has witnessed the power struggle between two of the biggest shareholders of Europe’s largest automaker, Volkswagen--- Porsche and the State of Lower Saxony.

The European Union court has repealed the very controversial Volkswagen law which was designed to protect Volkswagen from any possible form of takeover. The State of Lower Saxony has made use of the Volkswagen law to limit Porsche’s control over the supervisory board of the company despite the fact that it holds the largest amount of stakes at Volkswagen. The Volkswagen law limits the voting rights of shareholders to 20% regardless of the number of stakes they own in Volkswagen.

After all efforts to stop Porsche from gaining control over Volkswagen—maker of the popular Volkswagen radiator fan and owner of Audi, Bentley, SEAT and Skoda---the Premier of Lower Saxony Christian Wulff has finally put down the red flag and said that he will no longer interfere with Porsche’s desire to takeover both the chairmanship and the third seat on the company’s supervisory board for the next couple of weeks. Such political move by the Lower Saxony marks the signal for Porsche to take full control of Europe’s largest automaker.

It should be noted that Porsche has been slowly increasing its holdings in Volkswagen from the time it has become a shareholder of the automaker in September 2005. And at present Porsche already owns 27.4% stakes and will be increasing after gaining the votes of other shareholders for it to purchase additional shares bringing its total holdings to 29.9%. However, Porsche said that it will only pursue such if the Volkswagen law is repealed since according to Wendelin Wiedeking, they want to be given enough right to take part over the day-to-day operations of the automaker plus a seat at the chairmanship.

In order to repeal the Volkswagen law, the European Union has illustrated the law as unnecessary and obsolete further saying that it hinders the flow of free capital. If in case a ruling would finally come out soon it would finally give the right to Ferdinand Piech to hold multiple positions—as a controlling shareholder of Porsche and as upcoming Volkswagen’s chairman of the board and at the same time holding the third supervisory board seat at VW for Porsche.

There are rumors circulating in the European investment circles which say that Wulff is not yet through with Porsche. According to a report from Inside Line sources, the “Big Bad” Wulff is currently having private meetings with the other investors in an attempt to oust Piech once his term on Volkswagen’s supervisory board comes up for renewal in April.

The victory of Porsche over its stern rival the Lower Saxony came at the time when Volkswagen announced its 2006 profit earnings had doubled as compared to what it has gained for 2005. The automaker has also announced that its vehicle sales across the group has increased by a sturdy 9.4% or 5.7 million contributed mainly by Audi, Bentley and Skoda.