Volkswagen Shares Weaken As Diess Decision Apparently Delayed.
“The same old problem pops up again and again. VW is a kind of state-owned company with a stake in the stock exchange”
Volkswagen’s silence after a top committee reportedly discussed CEO Herbert Diess’s call to back his plan to reform the company’s lack-lustre financial performance, saw VW shares dive just over 1% Wednesday.
Unconfirmed reports in the financial media suggested the talks, which reportedly followed Diess’s request to extend his contract past its scheduled expiry date of April 2023, were inconclusive, and would resume at a full Supervisory Board meeting next week.
Diess was said to be exasperated that two key appointments that he believed were key to his plan to modernize the company – Arno Antlitz as chief financial officer and Thomas Schmall as chief procurement officer on the management board – were being opposed by union leaders.
Many investors have given up hoping VW would ever modernize its unwieldy management structure, where unions control half the votes on the 20-seat supervisory board. The balance is held by the state of Lower Saxony with two seats and often they side with the unions.
Investment bank UBS said the outcome of this issue will be seen as a powerful signal about the seriousness of VW management to shake off its reputation as a company not really serious about profitability.
“We expect the shares to react strongly to the outcome of this issue – a contract extension for Mr Diess would likely be seen very positively, while a negative outcome would likely weigh on sentiment and put VW’s aggressive EV (electric vehicle) and digitization strategy into question,” UBS analyst Patrick Hummel said.
On Wednesday VW’s shares fell 1.2% to €159.4.
VW has vowed to spend €73 billion ($88 billion) over 5 years on battery and digital technology. It has said by 2050, 25% of its global vehicle sales will be of battery-only vehicles.
Last June, Diess lost his other job as head of VW brand after a boardroom scuffle when he was forced to apologize for accusing fellow board members of leaking crucial information.
Diess apparently apologized at a supervisory board meeting in the summer for saying it had leaked news of software failings which had delayed the introduction of its first vehicle designed from the ground up to be electric, the ID.3.
The ID.3 is now on sale across Europe and was the biggest selling electric car in Europe in October.
Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research (CAR) in Duisberg, Germany has seen it all before.
“The same old problem pops up again and again. VW is a kind of state-owned company with a stake in the stock exchange. IG Metal (the union) and the state of Lower Saxony rule the supervisory board,” Dudenhoeffer said.
“This has been the fundamental problem for 50 years, and it keeps bringing up scandals. Shareholders are the minority at VW strategic decision committee, the supervisory board. The company lives and makes decisions from the union, so now again. So we have no balance of power between shareholders and union. Unions dominate VW,” he said.