New 'VW Law' to Preserve Workers' Veto Over Plant Relocations

VW unions want to avoid losing influence if their group is taken over by Porsche.

The German government presented a new "VW law" Jan. 16 that would preserve workers' rights to veto plant construction and relocations. The legislation is "good news for staff," noted Justice Minister Brigitte Zypries, as automaker Volkswagen faced an expected takeover bid by the luxury sports car maker Porsche. In addition, "important" decisions would require approval by 80% plus one share of investors during general assemblies.

Because the northern German state of Lower Saxony -- where VW is based -- holds 20% of the voting rights in Europe's biggest car maker, the law would also preserve its effective veto over VW strategy.

The DSW association, which works to protect the rights of small shareholders, responded in a statement which said: "It is regrettable that Volkswagen does not simply have the right to become a normal enterprise."

At last count, Porsche held 31% of the shares in VW, and has made no secret of its intention to raise that stake to more than 50%.

A prior "VW law" adopted in 1960 to protect the auto giant from takeovers was rejected in part by the European Court of Justice in October. The tribunal struck down in particular a clause that prevented a single shareholder from owning more than 20% of the voting rights, regardless of the size of its stake. That provision was removed from the new draft law, which was expected to be approved by the broad coalition government of Chancellor Angela Merkel and sent before the German parliament.

VW unions want to avoid losing influence if their group is taken over by Porsche, which has created a new company to control its holdings. A parity with Porsche workers on the company's board is deemed unfair given that VW employs 320,000 workers while Porsche has a staff of just 11,000. An initial legal challenge by the workers council was rejected but an appeal is scheduled for February 14.

Copyright Agence France-Presse, 2008

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