VW could bypass board in turnaround showdown

VOLKSWAGEN Group chief executive Oliver Blume could attempt to bypass the company’s powerful supervisory board and take his sweeping turnaround plan directly to shareholders if directors again reject deeper job cuts, factory closures, and structural reforms next week.

The extraordinary option represents a significant escalation in the internal battle over Volkswagen’s future and follows months of developments reported by GoAuto, including proposals to cut as many as 100,000 jobs, close or repurpose German factories, halve the group’s model portfolio, and dramatically reduce variant complexity.

Volkswagen’s 20-member supervisory board is scheduled to meet on September 4 for a second attempt at resolving the most contentious elements of Mr Blume’s restructuring program after rejecting deeper workforce reductions and factory closures at its July 9 meeting.

The stakes have since risen…

Mr Blume has warned Volkswagen cannot finance the investment required for its future with profitability at current levels and is targeting a group operating margin of around 9.0 per cent, compared with 4.2 per cent in the second quarter.

Management is understood to have prepared a 40-point turnaround plan that could effectively double previously agreed employment reductions from around 50,000 positions to as many as 100,000, while also allowing under-utilised German factories to close and some company divisions to be separated.

As GoAuto reported in July, facilities at Emden, Hanover and Zwickau, together with Audi’s Neckarsulm plant, have been identified as particularly vulnerable because they lack competitive long-term production programs beyond their present model cycles.

Volkswagen is battling weaker sales and margins in China, US tariffs, excess production capacity in Germany, and mounting competition from Asian manufacturers in Europe, while Mr Blume has previously estimated the group carries a cost disadvantage of approximately 20 per cent compared with key rivals.

However, labour representatives and the German state of Lower Saxony – both influential forces within Volkswagen’s unusual governance structure – remain strongly opposed to compulsory redundancies and plant closures.

Together they can command 12 of the supervisory board’s 20 seats when voting as a bloc, giving them sufficient strength to derail management proposals.

Works council chief Daniela Cavallo has argued Volkswagen must place greater emphasis on competitive products and technologies rather than relying predominantly on job cuts and site closures to restore profitability.

Lower Saxony premier Olaf Lies has similarly called for a negotiated agreement that preserves Volkswagen’s industrial base while addressing the need to improve efficiency, with talks continuing ahead of the September 4 vote.

Should the supervisory board reject Mr Blume’s proposal for a second time, management could reportedly convene an extraordinary general meeting as early as October and ask shareholders to approve the strategy directly.

Such a move would be highly unusual in Germany’s consensus-based corporate system and could ignite a lengthy legal dispute over the powers of Volkswagen’s board and shareholders.

The voting arithmetic at shareholder level is markedly different.

Porsche Automobil Holding SE, controlled by the Porsche and Piech families, holds 53.3 per cent of Volkswagen voting rights, while Lower Saxony controls 20.0 per cent, Qatar Holding 17.0 per cent, and remaining investors 9.7 per cent.

Without worker representatives holding voting rights at a shareholder meeting, management could theoretically assemble the three-quarters majority normally required for major corporate decisions if it secured support from Porsche SE, Qatar, and sufficient other investors.

But Volkswagen’s special governance arrangements complicate the equation.

The so-called Volkswagen Law requires an approval threshold exceeding 80 per cent for certain major decisions, effectively giving Lower Saxony a blocking minority.

According to reports, management may instead seek to use provisions of Germany’s Stock Corporation Act allowing resolutions at a shareholder meeting called against the wishes of the supervisory board to pass with three-quarters of votes cast – potentially opening the door to a court battle over which threshold applies.

Volkswagen could also ask shareholders to vote separately on particularly sensitive structural changes, including the possible future separation of its passenger-car and components operations.

Before that scenario is tested, however, both sides are expected to make another attempt at compromise.

The supervisory board’s executive committee – including Mr Cavallo, Mr Lies, and representatives of the Porsche and Piech families – will meet on September 3, one day before the full board vote.

Any agreement is expected to centre on reducing the scale or pace of additional job losses and finding alternative uses for factories that currently lack secure production beyond 2030.

The September meeting will also see Volkswagen’s supervisory board return to its full complement of 20 members, with former board member Marianne Heiss replacing Susanne Wiegand on the shareholder side and taking over as audit committee chair.

Her appointment restores the board’s formal 10:10 split between shareholder and employee representatives and could prove important in any tied ballot, where supervisory board chairman Hans Dieter Pötsch may ultimately hold the casting vote.

The looming showdown comes only weeks after Volkswagen detailed another major element of its Future Plan – reducing its global model range by as much as 50 per cent and cutting derivative and equipment complexity by up to 75 per cent as it seeks to concentrate investment on fewer, more profitable products.

Whether Mr Blume can now secure support for the far more politically difficult elements of that strategy – factories and jobs – will become clearer on September 4.