Latest Automotive News

Subscribe in a reader




Auto Price Quote
Get a free auto price
quote from Edmunds!

EU court overturns 'VW law,' removing obstacle for Porsche to mount takeover

Email   small font medium font large font

Google
 
Web AutoNews24h.com

A European court on Tuesday ruled that a German law shielding car maker Volkswagen AG from hostile takeovers is illegal, clearing the way for Porsche AG to increase its influence _ and possibly take control _ at Europe's biggest car maker.

The decision by the European Court of Justice also is expected to have wider ramifications across Europe, where many governments have tried to protect companies they see as vital to their economies from takeovers, particularly foreign ones.

German politicians and labour unions had argued that the law was needed to protect local jobs but the court, the EU's highest, said it was illegal. It ruled that the law limited ``the free movement of capital.''

The court also ruled that it discourages foreign investors from taking a stake in Volkswagen because the German federal government and the region of Lower Saxony _ a major shareholder _ are able ``to exercise considerable influence'' over the company.

``This situation is liable to deter direct investors from other member states,'' a court press statement said.

The law caps a shareholder's voting rights at 20 per cent, whatever the size of its holding.

In its ruling, the court also rejected the right of both the German federal government and the region of Lower Saxony, which holds 20.36 per cent of Volkswagen, to appoint two members of the board as long as they are shareholders of the company.

For Porsche, which has built up a 31 per cent stake in the company over recent years in anticipation that the VW law would be struck down, the ruling gives it carte blanche to take a wider stake.

Porsche chief executive Wendelin Wiedeking said his company was ``naturally very interested in being able to fully exert our voting rights'' in Volkswagen. However, he did not refer to the possibility of a takeover _ which many analysts expect.

Between them, Porsche and Lower Saxony already hold more than 50 per cent in Volkswagen _ meaning the door is closed for any would-be foreign suitors.

The court said Germany did not explain why it needed to protect workers by keeping ``a strengthened and irremovable'' stake in Volkswagen. It also rejected German government arguments that its special position protected minority shareholders.

Lower Saxony's conservative governor, Christian Wulff, said the state government accepted the decision.

He said that Lower Saxony would stand by its stake in Volkswagen and that its aim was ``for VW to be a successful company with high sales and satisfied employees with secure jobs, particularly at sites in Lower Saxony.''

``The state government wants to ensure this along with the other major shareholder, Porsche,'' Wulff said.

The ruling is a triumph for the European Commission, which has fought several battles against European governments and their ``golden shares'' in critical companies.

European Union regulators take their cue from rights enshrined in the EU's founding treaty that proclaim basic economic freedoms such as the right to do business anywhere in the 27-nation bloc.

That right is blocked if governments interfere with companies, the EU executive said.

It took Germany to court in 2005, and has since lined up or threatened cases against Spain over allegations it is protecting energy companies like Endesa SA, Italy for blocking a takeover attempt of highways company Autostrade SpA, and against Poland for hindering Italy's UniCredit SpA from consolidating its grip over a local bank.

Volkswagen _ German for ``people's car'' _ is one Germany's best-known companies, renowned for providing well-paid blue-collar jobs. From the ashes of the Second World War, it has become Europe's largest automaker, with brands from the more affordable Seat and Skoda to the upscale Audi and the stratospherically priced speedsters hand-built by Lamborghini.

Receive the latest automotive news by email!

Enter your email address:


Find the new car you want on cars.com

Related news
Porsche AG's chief executive said Wednesday that his company has made no decision on whether to raise its stake in rival German automaker Volkswagen AG, and suggested that it was in no hurry ...
BERLIN (AP) _ Germany's financial regulators have approved automaker Porsche AG's takeover offer for Volkswagen AG, which it was obligated to make after acquiring more than 30 per cent in ...
Automaker Volkswagen AG said Friday its third-quarter profit soared higher on improved sales in Asia, Europe and South America, along with lower costs for building cars. The Wolfsburg, Germany-based company, Europe's biggest car ...
FRANKFURT, Germany (AP) _ Volkswagen sold more than three million cars during the first half of the year, the German automaker said Thursday, a 7.8 per cent jump from last year fueled ...
WASHINGTON (AP) _ Automakers called for an economy-wide approach to global warming in reaction to a Supreme Court decision Monday that could give the government the authority to regulate the ...
SEOUL, South Korea (AP) _ Angry employees of subcontractors for Kia Motors occupied an assembly plant paint shop for a fourth day Tuesday as production losses mounted, the automaker said. The unrest caused ...
TORONTO (CP) _ TD Bank Financial Group (TSX:TD) declared victory Wednesday in its $326-million takeover of VFC Inc. after about 90 per cent of the used-car loan company's shareholders tendered into its bid. The ...
On Sept. 26, something happened that is likely to wreck Ben Carter's time-honoured health care business model. That's the day the United Auto Workers and General Motors Corp. settled on a revolutionary new ...
A Canadian couple filed a class-action lawsuit in U.S. District Court claiming they are being illegally discriminated against by car companies that turn down their business because they're from Canada, their lawyer said ...
SEOUL, South Korea (AP) _ An appeals court suspended on Thursday a three-year prison term handed to Hyundai Motor Co. Chairman Chung Mong-koo for embezzlement, saying the tycoon is too important to South ...

Best Investment Newsletter

- 46% in 2008

- invest in the best performing US stocks only and sell them when the uptrend is over

- very easy to follow, simple buy/sell signals

- no need to have investing or trading experience

Find More Now!


EU court overturns 'VW law,' removing obstacle for Porsche to mount takeover
> © 2006-2011 AutoNews24h.com except where otherwise noted