BRAUNSCHWEIG, Germany (Thomson Financial) - A German parliamentarian from the conservative Christian Democratic Party CDU said the German government should take a five percent stake in Volkswagen AG. to resolve an impasse surrounding Lower Saxony state's blocking minority vote.
Jochen-Konrad Fromme, also the CDU budget expert in the Lower House of Parliament, or Bundestag, told the Braunschweiger Zeitung newspaper in a prerelease of tomorrow's edition that the state-owned development bank KfW should acquire the VW stake on behalf of the national government.
The federal state of Lower Saxony currently holds 20 percent voting rights in VW and under the VW articles of incorporation, this 20 percent represents a blocking minority vote.
VW's biggest shareholder Porsche AG. failed on Thursday night to get approval at the annual shareholders meeting for its proposal to scrap Lower Saxony's 20 percent blocking minority in Europe's biggest carmaker.
As a result, a clause in VW's articles of incorporation which defines the 'required majority' vote as 80 percent of shares at an AGM remains in place. A required majority is needed on any strategic issues, such as plant closures in Germany.
Porsche's proposal which to lower the threshold to 75 percent to comply with EU laws. Porsche holds around 31 percent stake in VW and has said it wants to increase this to more than 50 percent.
Lower Saxony, which contends that the 80 percent threshold does not violate German and EU laws, said it now expects a long legal battle around the blocking minority issue. It said it has no plans to increase its 20 percent stake to 25 percent.
Fromme said in order to avoid any long court battle, the national government should take unto itself the responsibility of acquiring a stake in VW.
Fromme said together with Lower Saxony's 20 percent stake, the government side would secure a de facto blocking minority in VW.
He said this solution is better than that of Lower Saxony increasing its VW stake, because such a move would only trigger a further deterioration in the relationship between Porsche and the federal state.
But the entry of KfW as an investor could force Porsche to return to the negotiating table, he added. marilyn.gerlach@thomsonreuters.com dp/mog/rw COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2008 AFX News
