Volkswagen Chairman Piech’s Wife Joins Board as Family Strengthens Control
Volkswagen AG (VOW3) nominated Ferdinand Piech for a third term as supervisory board chairman and proposed that his wife join the board as the Piech-Porsche family solidifies its sway over Europe’s largest carmaker.
VW’s board is proposing Ursula Piech, 55, to replace TUI AG Chief Executive Officer Michael Frenzel, whose term expires at the annual meeting April 19, according of the Wolfsburg, Germany-based carmaker’s invitation for the gathering. Ferdinand Piech, 74, will also seek another term running the board.
The addition of Ursula Piech would increase the number of Piech-Porsche family members on the 20-person board to five. The family controls the Porsche SE (PAH3) holding company, which in turn owns a majority of VW’s voting shares. VW targets matching last year’s record profit in 2012 as renewed versions of the Audi A3 and VW Golf offset softer Europe demand.
“VW has in essence become an Austrian family-run company,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “It’s the family that makes the decisions. It’s unusual in a publicly listed company.”
Ursula Piech is a “kindergarten teacher with additional qualifications in business and law,” according to the annual meeting invite, which says she is currently not working. Ferdinand Piech has the support of the board to continue as chairman, people familiar with the matter said in October. The Piechs’ main residence is in Salzburg, Austria.
Piech has held significant influence at VW for decades, having served himself as chief executive officer before becoming board chairman. Piech pushed out then-CEO Bernd Pischetsrieder at the end of 2006 in favor of his longtime ally Martin Winterkorn, who was Audi’s chief at the time.
Winterkorn said today that he’s known Ursula Piech for years and she’s a “very competent” person who will help VW advance as it targets passing General Motors Co. (GM) as the world’s largest automaker by 2018.
Hans Michel Piech, Ferdinand Oliver Porsche and Wolfgang Porsche are also on VW’s board. Shareholders Qatar Holding LLC and the German state of Lower Saxony each have two board seats. Ursula Piech will be the third woman on VW’s board.
“Ursula Piech has for years closely followed the developments of the Volkswagen group with great interest,” David McAllister, Lower Saxony’s prime minister, said in e- mailed statement backing her nomination. “With Ursula Piech we also add another competent woman to the supervisory board. That is also a positive sign.”
The world’s second-largest carmaker reported record results last year, with earnings before interest and taxes gaining 59 percent to 11.3 billion euros ($14.8 billion). VW this year faces a slump in Europe and extra costs from the introduction of a new generation of its best-selling Golf hatchback, which is based on technology that will also underpin Audi, Seat and Skoda models.
“Despite all the uncertainties, we remain cautiously optimistic for the coming months,” Winterkorn said in a speech today at the company’s headquarters in Wolfsburg, Germany. “Our goal for operating profit is to repeat the high level we achieved in 2011.”
Winterkorn’s total compensation nearly doubled last year to 17.5 million euros from 9.33 million euros in 2010.
Volkswagen’s fourth-quarter earnings before interest and taxes fell 0.9 percent to 2.29 billion euros. The namesake brand’s operating profit in the period fell 13 percent to 540 milion euros, while the Seat brand’s loss widened to 124 million euros from 93 million euros aa year earlier.
“The core business is in reverse” as losses accelerated at Seat, and profitability at VW declined in the fourth quarter, said Arndt Ellinghorst, a London-based Credit Suisse analyst with an “outperform” rating on the shares. “It tells me that VW is not immune to Europe.”
Volkswagen dropped as much as 3.90 euros, or 2.7 percent, to 138.90 euros and was down 2.6 percent to 139.05 euros as of 3:49 p.m. in Frankfurt trading. The shares have climbed 23 percent over the past 12 months, valuing the carmaker at 61.2 billion euros.
Volkswagen will introduce 40 new and upgraded models this year to help counter an anticipated fifth straight annual decline in Western European car demand. The company aims to increase operating profit in 2013, it said in its annual report. The company is also continuing to work on an integration of Porsche SE’s carmaking operation.
VW aims to outpace the “low single-digit” growth rate in the global car market this year, sales chief Christian Klingler said last week in Geneva. The company sold a record 8.27 million vehicles in 2011. The German company has expanded production of SUVs such as the VW Tiguan and Audi Q5 to meet demand in the U.S. and China, its largest market.
The German carmaker has budgeted a record 62.4 billion euros under its rolling five-year business plan to invest in factories and new models, with an additional 14 billion euros earmarked for its joint ventures in China. Future growth may also come from pending mergers.
VW is exploring options to combine with majority shareholder Porsche (PAH3) after scrapping plans last year for a merger because of legal tangles. To avoid further delays, VW is closing in on a deal to purchase the remaining 50.1 percent stake in Porsche’s automaking business that it doesn’t already own, people familiar with the matter said on Feb. 27.
Approval from German tax authorities is one of the hurdles to an agreement, which VW and Porsche are still negotiating, the people said, declining to be identified discussing private talks. VW is considering setting up an umbrella company to purchase the stake and avoid taxes that would eat up savings from the deal, according to one of the people.
“There are still some hurdles to cross on the way towards full integration” with Porsche, Winterkorn said in a speech today. “What I can tell you is that the integrated Volkswagen and Porsche group will happen.”
VW last year took a majority stake in German truckmaker MAN SE (MAN), raising its holding to 55.9 percent. VW has been seeking closer links between MAN and Soedertaelje, Sweden-based Scania AB (SCVB), which it also controls. VW’s goal is to forge a three-way truckmaking alliance to save as much as 1 billion euros in annual costs, the German auto manufacturer has said.
“All options are open to us when it comes to the further structuring of an integrated commercial vehicles group,” Winterkorn said. “What matters most is close, mutual collaboration and this is something we have significantly stepped up in recent weeks and months.”
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