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VW Governance Could Change After Lower Saxony Election

VW Governance Could Change After Lower Saxony Election.

“Should the CDU win on the 15th, there is strong possibility that Althusmann will end on VW’s Supervisory board representing Lower Saxony”

While Mercedes is apparently ready to restructure, long-term candidate for more transparent governance Volkswagen is also coming under the spotlight.

For years, analysts and investors have implored VW to change its structure to give shareholders more power and curb entrenched politicians from Lower Saxony and the unions.

But now a new and intriguing possibility looms because on October 15, an election in Lower Saxony is expected to see the victory of Bernd Althusmann, if as predicted the CDU led coalition defeats the SPD’s Stefan Weil, current premier of Lower Saxony. If Althusmann wins he would be entitled to a seat on VW’s supervisory board.

Investment researcher Evercore ISI pointed out that soon after VW CEO Matthias Mueller told the Wall Street Journal in an interview that he was actively working to sell “non-core” assets, the VW Workers Council issued a statement that it would block any asset disposals.

Speculation has been rife that as part of its attempt to slim down a bit, VW was thinking about selling off its motorcycle brand Ducati, while analysts have urged it to consider spinning off Porsche, Audi and VW Trucks.

Answering a question on speculation following a report VW was about to do a deal on vans with Fiat, which quickly morphed into it wanting to buy Fiat Chrysler Automobiles (FCA) or just its Jeep subsidiary, Mueller said this.

Bloated enough
“We’re a big company and don’t have any interest in getting any more bloated. There has been a lot of speculation about FCA which we’ve noted, but it is just speculation and nothing more,” Mueller said.

“The list (of asset disposals) has not been put away on the shelf. But we’re not going to let anyone tell us which decision to make,” Mueller said. 

That prompted the union statement about blocking sales.

But Evercore ISI analyst Arndt Ellinghorst wondered if times might be a changing.

“Clearly the market will read this as yet another demonstration of VW’s questionable governance. Who’s running the company? Management or Unions?” Ellinghorst said.

Ellinghorst reminded investors that Althusmann has said VW should perhaps look outside the company when it replaces the CEO, if he wins on October 15.

“Should the CDU win on the 15th, there is a strong possibility that Althusmann will end on VW’s Supervisory board representing Lower Saxony. In addition to recent comments around the next CEO, Althusmann previously promised to give one of the two Lower Saxony seats to an independent and qualified person as opposed to another politician from Lower Saxony,” he said.

The key?
“It seems Althusmann may be the key to moving VW’s governance and fortunes forward,” Ellinghorst said.


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