German state refused to clear VW management but relented: source

Mon May 16, 2016 12:02pm EDT
 
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By Andreas Cremer

BERLIN (Reuters) - Volkswagen (VOWG_p.DE: Quote) shareholder Lower Saxony wanted to withhold its backing for the carmaker's top management at a supervisory board meeting but relented to avoid further damaging the firm, a source close to the German federal state said.

Representatives of the Lower Saxony government, which has a 20 percent stake in VW, raised their objections last week when the supervisory board debated whether to endorse the managers' actions in 2015 - the year the company was engulfed in a scandal over the rigging of U.S. emissions tests.

However, they backed off following a plea from Chairman Hans Dieter Poetsch, fearing their stand would be seen as a vote of no-confidence vote in VW's leadership, the source told Reuters.

VW declined to comment.

Last month Volkswagen announced a 4.1 billion euro ($4.63 billion) operating loss for 2015. It has reached a nearly $10 billion deal with the U.S. government, but still faces an array of civil law suits and members of its management board - which runs the company day-to-day - are under fire over their bonus scheme.

In the end, the supervisory board recommended after its May 10 meeting that shareholders should vote to ratify the actions of the top management, including Chief Executive Matthias Mueller, at the annual general meeting on June 22.

Such shareholder votes are common for German companies but in VW's case the crisis means that approval is not a formality.

Support from Lower Saxony is vital for VW's management along with the backing of the company's two other major shareholders, the Piech and Porsche families and the Gulf state of Qatar.   Continued...

 
A Volkswagen logo is pictured at Volkswagen's headquarters in Wolfsburg, Germany, April 22, 2016. REUTERS/Hannibal Hanschke/File Photo