Rhineland capitalism: jolts or rebound?
The European Commission wants to abolish the “Volkswagen law” which prevents a single shareholder from holding more than 20% of VW’s voting rights. Until now, this law protected Volkswagen from foreign investors by capping their voting rights. In 1960, when the German state privatized Volkswagen founded under the Third Reich, the federal government and Lower Saxony each retained 20 pc of the shares. At the same time the Bundestag adopted the VW law capping voting rights at 20 pc per shareholder. During the 1990s the Kohl government sold its 20 pc, but Lower Saxony, keen to preserve jobs in Wolfsburg and the region, retained its stake.” The German law which protects Volkswagen, the leading European car manufacturer from “any hostile takeover offer does not respect the rules of the European Union”: this is what one of the advocates general of the European Court of Justice declared.
The European Court, which usually follows the recommendations of the Advocate General, will decide in summer 2007. By recommending to the Court of Luxembourg to abolish this obstacle to the “free movement of capital”, the Advocate General at the European Court of justice has, in fact, opened the way to Porsche: the Stuttgart automobile group, which is already the largest shareholder of VW, could then take the majority. The European Commission’s complaint against the law and the appearance of predators had in fact prompted Porsche to buy shares. Now that the 20pc voting rights limit will be lifted, most experts expect Porsche to take the majority of VW. (Various sources)
lism is. The link opposite will provide this. We will limit ourselves to observing that the liberal and social order on which it is based is more and more liberal and less and less social.
In this case, the first point is that, although proceeding according to its constitutive logic, the European Union opens the door to the “locusts” and acts objectively in a liberal and not social sense.
The second point is that, even if the appearance of potential raiders is counterbalanced by the participation of Porsche – which, despite the futility of its product, is a family business which is part of Rhineland capitalism and which says it wants to protect VW from hedge “locust” funds who might want to carve it up – it is obvious that the probable presence of the CEO of Porsche on the supervisory board of Volkswagen will increase the pressure for Volkswagen to become profitable again or even more profitable through job cuts.
The slightest paradox is not that the “protector” Ferdinand Piëch (linked to the Porsche family and chairman of the supervisory board of VW), who is the instigator of this process, had distinguished himself in a questionable manner in attempts to Americanization of VW’s management while he was boss: his call to the North American-style “cost killer” manager Jose-Ignacio Lopez led not only to a legal imbroglio, but also to considerable quality problems , in particular for the Golf IVs of the early years, which handicapped VW financially for a long time and which damaged its image.
If in principle we should therefore welcome the rise of Porsche in VW’s capital, we can doubt its effectiveness in practice.
Over the last two decades, the influence of the Anglo-American model – considered more efficient – has led to significant changes in the German economic system. Large companies, less and less family-owned, have distanced themselves from the banks, under whose protection they had lived for a century. Left to their own devices and prey to shorter-term fluctuations in the stock market economy, they are experiencing difficulties. Alliances with foreign companies seemed likely to compensate for the lack of funds and outlets, but the results were most uneven, failing for example for the Borsig-Babcock or Dornier-Fairchild alliances. More recently, what had apparently succeeded for Daimler with the purchase of Chrysler finally ended in a slump. Purchased by Daimler in 1998 for 36 billion dollars, Chrysler was resold at 80% in 2007 for some 5.5 billion euros, or a total valuation of around 10 billion dollars.
