VW under fire at AGM

22 April 2004

HAMBURG – Volkswagen management came in for sharp criticism Thursday at the annual shareholders meeting, but the company also had major news of its own, with plans to join hands with Abu Dhabi in taking over Europe’s largest car leasing concern.

Coming after operating profit plunged 63 percent last year, VW chairman Bernd Pischetsrieder told the meeting in Hamburg that VW had set an “ambitious target” this year of surpassing the 2003 operating profit of EUR 2.5 billion.

But the shareholder session saw VW management in for sharp criticism over the company’s performance in general and its luxury car “Phaeton” in particular.

Hans Georg Martius, head of the shareholder lobby group SdK, demanded that if VW’s luxury segment does not achieve a turnaround in the next three years, then it should be cancelled.

Other shareholders derisively called the Phaeton an “expression of megalomania” on the part of Pischetsrieder’s predecessor at VW, Ferdinand Piech. They demanded that VW should return its focus to cheaper cars for the broad market.

At the meeting in Hamburg, Pischetsrieder also divulged the plans to boost the group’s leasing activities in buying the Dutch-owned LeasePlan company, in a move which in stages would also help Abu Dhabi gain a major stake in VW.

It would make the emirate the second major stakeholder in the German car industry, in addition to the long-standing share in DaimlerChrysler held by Kuwait.

Pischetsrieder said that an Abu Dhabi state investment company aimed to become a shareholder in a “multi-staged conversion process”, whereby the emirate’s interest is linked to its cooperation with VW in purchasing the leasing company LeasePlan.

His comment came as the company said that it aimed to acquire a 50 percent stake in LeasePlan, now owned by Dutch bank ABN Amro, for EUR one billion.

The other 50 percent, for EUR one billion, would be acquired by investors in Athens and Abu Dhabi. The deal is subject to approval by regulatory authorities.

Pischetsrieder said Abu Dhabi would be a “stable partner”, while VW company sources said that ultimately, the emirate could end up holding 6.5 percent of VW, making it the second-biggest shareholder after the state of Lower Saxony’s 18 percent stake.

VW would then itself own just 3.5 percent of its own equity, the sources said.

The car concern already is involved in leasing through its Volkswagen Financial Services affiliate. LeasePlan, with a fleet of 1.2 million cars, revenues of EUR 10.8 billion and net income last year of EUR 193 million, is Europe’s market leader in the field. Pischetsrieder said that the purchase of LeasePlan was “sensible and necessary”.

While VW’s cost-cutting programme “ForMotion” – aimed at producing savings of EUR four billion had first priority in the company’s efforts, the group could not neglect its drive to position itself as a “customer-oriented service provider” over and above its production of cars, Pischetsrieder said.

DPA

Subject: German news