VW CEO tries to appease investors angered by cheating scandal | Fin24
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VW CEO tries to appease investors angered by cheating scandal

Jun 22 2016 17:45
Christoph Rauwald and Naomi Kresge

Germany - Volkswagen chief executive officer Matthias Mueller sought to appease shareholder anger over the worst crisis in the car maker’s history by shoring up internal controls to prevent a repeat of the diesel-emissions scandal.

Mueller apologised to shareholders at their first gathering since the crisis wiped 20% off the stock’s value and pointed to progress with authorities, announcing that German regulators on Tuesday signed off on fixes for an additional 1 million vehicles, bringing the total number approved to 3.7 million.

"What’s done cannot be undone," Mueller, who took over as CEO last October after the scandal came to light, said Wednesday in his speech in Hanover, Germany.

"What does lie in our power is ensuring we act in a responsible manner. This is our commitment to you."

Mueller and the rest of VW management face a grilling this afternoon from shareholders over how the crisis unfolded and their response in the aftermath.

The meeting is likely to drag on into the evening, with many institutional investors encouraging owners not to ratify the actions of the management and supervisory boards in what would essentially be a vote of no confidence in the car maker’s actions.

"The corporate governance problem at VW starts with the supervisory board," said Hans-Christoph Hirt, co-chief executive officer of shareholder advisory group Hermes Equity Ownership Services, citing a lack of independent members well-versed in the auto industry.

"This is an exceptional situation, and we believe a special audit by external, independent investigators is needed to clarify what went wrong."

Chairman Hans Dieter Poetsch, who served as chief financial officer when the cheating occurred, is hosting the meeting amid criticism about his direct move from executive to chief overseer. He’s also faced a backlash over his pay - and that of other managers - as top executives have held on to their bonuses, albeit at a reduced level.

Poetsch on Wednesday said will "review" remuneration policies, without promising any changes.

"You are a conflict of interest personified," said Markus Dufner, managing director of the German Association of Ethical Shareholders. Poetsch shouldn’t supervise the investigation into a scandal that came to fruition while he was an executive, Dufner said.

Poetsch said VW was still recommending that owners approve the actions of the two boards, despite a new market manipulation investigation announced by German authorities on Monday. The vote has limited legal implications.

Institutional investors hold non-voting preferred shares, while the voting stock is mainly in friendlier hands.


The Porsche and Piech families, descendants of the creator of the VW Beetle, own 52% of the common shares. Porsche SE, the holding company for the family’s stake, is sticking with a recommendation to exonerate Volkswagen’s management and supervisory boards.

The German state of Lower Saxony holds 20% and has special rights, along with workers, that are enshrined in Volkswagen’s bylaws. The supervisory board was split over the recommendation to approve management’s actions, Frankfurter Allgemeine Zeitung reported, citing unnamed company sources.

Public shareholders "have never fared worse compared to the other VW stakeholders," Ulrich Hocker, a representative of German shareholder association DSW said in a speech. "I only have one description for this: total failure."

Enjoying trust

Joerg Hofmann, head of labour union IG Metall and deputy chairman of the supervisory board, defended Poetsch, saying at the meeting that he is the only person who has the support of workers and enjoys the trust of major shareholders.

The automaker has been hit in recent days by another barrage of negative news, with a settlement with US authorities over the cheating being delayed until next week, the new allegations emerging in Germany and shareholders filing another suit against the automaker.

On Monday, Braunschweig prosecutors opened a probe into whether former CEO Martin Winterkorn was too slow to tell investors about the potential cost of rigging diesel cars to pass emissions tests.  Herbert Diess, head of the VW brand, is also being investigated.

Volkswagen said the investigation doesn’t involve new facts or revelations and had previously argued that the company informed investors properly based on the information available at the time.

The California State Teachers’ Retirement System claimed on Tuesday that VW misled investors about emissions, seeking damages that could reach as high as €700m if other investors agree to join the action.

Another 278 institutional investors sued in March, seeking €3.3bn in a lawsuit over the timing of market disclosures.

Volkswagen has so far set aside €16.2bn for the scandal, including repairs, legal costs and fines.

"VW is multiplying the damage that has been done already by reacting only to the things where it sees the most urgency," Henning Wegener, a board member of Stichting Volkswagen Investors Claim, a foundation established last year to urge a settlement for a group of investors whose holdings total €13bn, said at a press conference on Monday in Frankfurt.

"The damage to date is colossal."

volkswagen  |  industrial  |  scandal


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