Key facts
- Volkswagen management is seeking approval for a major turnaround plan involving job cuts and potential factory closures.
- The plan faces opposition from labor representatives and the state of Lower Saxony, who hold a majority on the supervisory board.
- A supervisory board meeting is scheduled for September 4 to vote on the restructuring proposals.
- If the board rejects the plan, management may call an extraordinary shareholder meeting to put the strategy directly to investors.
- Volkswagen's governance structure, with a majority of labor and state representatives on the supervisory board, creates an impasse.
- Management may seek to bypass the supervisory board's opposition by invoking German corporate law for an extraordinary shareholder meeting.
Volkswagen's management is preparing to present its most significant turnaround plan to date, which includes doubling job cuts and potentially closing factories. This strategy has created a rift between management and powerful labor representatives, as well as the state of Lower Saxony, the company's second-largest shareholder, both of whom have introduced counter-proposals that reject layoffs and site shutdowns.
The crucial vote is set to take place on September 4, when Volkswagen's 20-seat supervisory board convenes. However, the board's composition, with labor and Lower Saxony holding a combined majority of 12 seats, means management's plan could be blocked, as it was in July.
Should the board reject the 40-point plan again, Volkswagen's management might resort to an unusual move in Germany's consensus-driven corporate culture: calling an extraordinary shareholder meeting as early as October. This strategy aims to bypass the supervisory board's opposition. The appeal of such a meeting lies in the differing power dynamics; while labor representatives and Lower Saxony dominate the supervisory board, at a general shareholder meeting, workers have no say, and Lower Saxony's 20% stake would be significantly outvoted by Porsche SE (53.3%), Qatar (17%), and other shareholders, potentially enabling management to secure the 75% majority typically required for major structural decisions.
However, the path to an extraordinary shareholder meeting is not straightforward. The "Volkswagen Law" mandates over 80% shareholder approval for significant corporate actions like business spin-offs, giving Lower Saxony an effective blocking minority. To circumvent this, Volkswagen's management may invoke Article 111 of Germany's Stock Corporation Act, which allows resolutions at an EGM to pass with a three-quarters majority of votes cast if convened against the supervisory board's wishes. This maneuver could trigger a protracted legal dispute. Management might also seek separate shareholder votes on plans to carve out its passenger-car and components divisions, as these specific proposals could be more susceptible to the higher threshold of the Volkswagen Law.
Amidst these potential conflicts, talks are ongoing. The board's executive committee, comprising representatives from VW's works council, Lower Saxony's state premier, and members of the Porsche and Piech families, is scheduled to meet on September 3. Sources familiar with the negotiations suggest that any compromise is likely to center on the scale of job cuts and the future of factories at risk, though the deepening industry crisis complicates reaching an agreement.