Picture: ISTOCK
Picture: ISTOCK

Frankfurt — Volkswagen’s (VW) influential labour leaders are open to granting the heavy-trucks division more independence, potentially leading to a share or bond sale, according to people familiar with the matter.

In a rare move for German labour representatives, this week, a top-level delegation led by VW works council chief and supervisory board member Bernd Osterloh discussed the future of the division as well as topics from the role of unions to cost savings, said the people, who asked not to be identified as the meetings weren’t public.

A spokesman for VW’s works council declined to comment. A VW investor relations official said the car maker has been made aware of the works council meetings in London, but that these weren’t part of a regular roadshow organised by the manufacturer.

The labour comments could revive expectations for more sweeping changes to VW’s sprawling structure beyond the largely internal revamps initiated since a diesel-emissions scandal erupted in 2015.

After the Germany-based car maker announced an asset review in June last year to identify non-core operations, efforts to sell the Ducati motorbike unit fizzled amid opposition from labour unions and the family that owns a majority voting stake.

VW stock gained as much as 2% when markets opened on Friday and traded up 1.5% at ¤170.05 at 9.28am in Frankfurt. The stock increased 28% year-to-date, valuing the company at ¤85bn.

Worker representatives account for half the seats on VW’s 20-member supervisory board and can block major corporate decisions. VW labour leaders’ willingness to meet the financial community in London earned praise from attendees, and the discussions included one-on-one conversations with representatives from activist investors, according to the people familiar with the matter. The talks were constructive and informative, according to the people.

VW folded its Scania, MAN and a Brazil-based commercial-vehicle operations into a separate division two years ago, de-coupling decision-making from its larger passenger cars operations. The VW Truck & Bus division generates annual revenue of about ¤25bn, compared with ¤217bn for the whole group.

Osterloh, one of the most influential officials at the manufacturer, has often pursued a pragmatic approach and engages actively in strategic questions to safeguard workers’ interests. His support is vital for VW’s push to forge a global rival in the commercial vehicle industry and take on leaders Daimler and Volvo. VW trucks chief Andreas Renschler reiterated last month that the company is keeping all options open to expand the business worldwide, including a possible share sale.

But within VW, Osterloh’s overture in London provides potential for internal friction. On Monday, hours before labour leaders started their meetings in London, VW chief financial officer Frank Witter upgraded profit and revenue targets for 2020, which sent the stock higher. Witter, speaking on a webcast, said he would not comment on asset disposals.

"This is no subject I can or should report on during this call," Witter said, responding to a question from UBS analyst Patrick Hummel on whether VW’s board discussed asset disposals at a meeting last Friday.

The unorthodox roadshow by VW labour officials highlights a complex governance structure that’s drawn ire from investors for years. Worker representatives have unusual sway at VW, even by German corporate standards.

The German state of Lower Saxony holds a 20% voting stake, making it the manufacturer’s second-largest shareholder after the owner family. The stake gives the state far-reaching veto rights that are enshrined in VW’s bylaws. Lower Saxony and VW unions usually vote to protect jobs in the region, where the car maker is by far the biggest employer.

The Porsche and Piech family controls 52% of VW’s voting stock. The emirate of Qatar holds another 17% of common shares, meaning the world’s largest automotive maker is effectively shielded from outsiders pushing for change. VW’s widely traded preferred shares don’t carry voting rights.


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