EU executive starts action against Germany over VW

The European Court of Justice ruled last year that the VW Law in place since its privatization violated EU rules on the free flow of capital. Rival carmaker Porsche wants to take control of Europe’s biggest carmaker but a draft amendment to the law preserves the state of Lower Saxony’s blocking minority in VW.

“The European Commission has decided to open infringement proceedings against Germany following its failure to comply with a Court of Justice ruling of 23 October 2007 regarding the 1960 law privatizing Volkswagen,” the Commission said in a statement, confirming a Reuters report. Germany has two months to respond or face a final warning before being hauled back to the court. “Failure by the German authorities to comply with the 2007 judgment could result in fines being applied by the Court of Justice,” the Commission said.

A spokesman for EU Internal Market Commissioner Charlie McCreevy said it was unacceptable that a public authority had a preferential say in a private company. “That is not good for investors from other member states. At this stage, there is no other way but to start a procedure,” the spokesman told a regular news briefing. A German government source said the move by Brussels had been expected. “The Commission has not yet been formally briefed about the cabinet decision from last Wednesday,” the source said, referring to proposed changes which addressed some EU concerns but left in place Lower Saxony’s blocking minority. The briefing is supposed to happen soon.

REGRETTABLE

Lower Saxony state premier Christian Wulff called the decision “expected but regrettable”. “The Commission is not ready or willing to follow the German government’s arguments,” he added. IG Metall, a labor union representing VW workers, said Brussels should ask itself whether it wanted to mould the image of Europe only by capitalism. “With just a few months to go before the election of the European Parliament, this is a fatal signal,” IG Metall boss Berthold Huber said in a statement. Were Berlin to back down, it would almost certainly pass a revised law that still called for a two-thirds majority on the supervisory board when it came to expanding, shrinking or shifting VW’s global production footprint. With half the board comprising German labor representatives, this would continue to ensure German plants would be protected from closure even when Porsche controls the majority of Volkswagen.

Porsche has said the entire law to be repealed, calling it an anachronism and demanding that the former state-owned carmaker be treated like any other company in Germany. Porsche itself is shielded from takeovers since only members of the Porsche and Piech clans hold non-listed voting shares, with all trade in the company strictly in preferred shares that comprise half the carmaker’s stock capital. Volkswagen employs more than 80,000 in Lower Saxony, and the unions have fought hard to keep the special rules governing their company and prevent Porsche from taking control. German Justice Minister Brigitte Zypries, speaking to a crowd of VW workers at the carmaker’s Wolfsburg plant last month, urged Brussels to back down. (Reuters)