VW Law: EU sues Germany over Volkswagen Golden Share

VW Law attacked by EU

We often bemoan the fact that, although we have a car industry in the UK, it’s either owned by businesses outside the UK or an offshoot of a foreign car maker. Unlike Germany, where their car makers are owned by Germans.

But that’s partly our fault, at least as far as Europe’s biggest and most successful car maker – Volkswagen – is concerned.

After WW2, the remains of VW were handed over to the control of a British officer – Major Ivan Hirst – and Germany has Major Hirst to thank not just for its existence, but also, to a degree, for the ‘VW’ Law that protects Volkswagen from takeover.

In reality, VW had been a political tool of Hitler, used for military rather than commercial purposes. Which meant it could be dismantled and destroyed under the terms of the Potsdam Agreement. But Major Hirst thought differently.

He painted up a few VWs and talked the British Army in to placing an order for 2,000 cars and, despite bomb damage to the factory and holes in the roof, VW was soon making 1,000 cars a month. Major Hirst tried to get car companies from Britain, France and America to take over the burgeoning VW enterprise, but they all declared it a waste of time.

But under the protection of Major Hirst VW managed to survive, and when he left VW in 1949 it was turned in to a trust controlled by the West German Government and the state of Lower Saxony. And it’s parts of that trust that has protected VW from takeover and outside investment ever since.

The State of Lower Saxony still has huge clout at VW with its 20 per cent share, as VW’s structure restricted the voting rights of all other shareholders to the same level as Lower Saxony’s shareholding - 20 per cent. Which effectively meant Lower Saxony could block any VW decision with which it disagreed.

But Germany capitulated to EU law a few years ago and allowed the share voting restriction to be removed, but it did leave in place Lower Saxony’s ability to block major changes by making VW have 80 per cent of the votes plus one to make major changes.

That ‘Golden Share’ protected VW from Porsche’s takeover moves recently (which ended in VW actually swallowing up Porsche) and the German Government are keen to keep the current status quo.

But Brussels sees it differently, and has been trying for a decade to undo the VW Law. It has now decided to take Germany to court over the matter, demanding Lower Saxony’s 20 per cent minority share blocking be scrapped and a fine of €46 million imposed. Which isn’t going to go down well in Germany. You’d think Europe had enough to worry about at the moment instead of attacking the structure of one of Europe’s most important businesses.

Makes you wish Major Hirst had got his hands on Jaguar, Land Rover, Bentley, Rolls Royce, Austin, Morris, Triumph…

How different things could have been.

By Cars UK