Bloomberg News

VW’s Truck Merger Faces Resistance as MAN Opposition Mounts

June 23, 2011

June 24 (Bloomberg) -- Volkswagen AG faces resistance to efforts to forge a commercial-vehicle alliance between its Scania AB affiliate and MAN SE, as criticism from workers and investors to the automaker’s inroads intensifies.

Supervisory board members representing MAN employees oppose plans to install additional VW executives at the German truckmaker, two people familiar with the matter said. Investor watchdogs, including Institutional Shareholder Services, are joining the defiance ahead of MAN’s annual shareholder meeting on June 27.

“We’ll probably see some heated discussions at the shareholder meeting about corporate governance rules,” said Nicola Lopopolo, who sits on the 16-member MAN board and heads the works council of the Munich-based company’s RENK AG unit.

Ferdinand Piech, the chairman of both VW and MAN, aims to appoint three new VW executives to MAN’s board, expanding the automaker’s representation to five members, or more than half of the investor seats. The tighter control is part of a strategy geared toward surpassing Toyota Motor Corp. as the world’s biggest automaker by 2018 by creating a manufacturer that supplies vehicles ranging from subcompacts to 50-ton trucks.

In addition to the new board members, the Wolfsburg, Germany-based company plans to switch Ulf Berkenhagen, procurement chief at VW’s Audi unit and a member of MAN’s board, to the truckmaker’s management team, said the people, who spoke on condition of anonymity because the deliberations are private. Berkenhagen’s switch is intended to promote joint purchasing by MAN and Scania, the people said.

Dominique Nadelhofer, a spokesman for MAN, declined to comment, as did a VW spokesman.

Piech’s Empire

“Piech has been hooked on the notion of an all-embracing auto empire that includes trucks, and he’s surging ahead to get it done,” said Frank Schwope, a NordLB analyst in Hanover, Germany, who recommends buying VW and MAN stock. “The policies he employs aren’t satisfactory to everybody.”

Europe’s largest carmaker increased its stake in MAN to 30.5 percent from 29.9 percent on May 9, triggering a mandatory bid. The offer, which was below the share price when the tender started May 31, was intended to give VW regulatory clearance for deeper cooperation between MAN and the Soedertaelje, Sweden- based Scania, which VW controls.

Doubling Up

MAN will propose the election of VW Chief Executive Officer Martin Winterkorn, Chief Financial Officer Hans Dieter Poetsch and executive board member Jochem Heizmann to the board. Shareholders will also be asked to re-appoint Piech and Rupert Stadler, head of VW’s luxury Audi brand. Investors and workers hold eight board seats each.

The overlapping positions of the executives have riled corporate governance watchdogs. German shareholder lobby DSW and Institutional Shareholder Services, a U.S.-based agency advising investors, are both urging opposition to the appointments of Winterkorn, Poetsch and Heizmann.

“Appointment of the three managers would bring about a disproportionate presence of VW at MAN,” DSW managing director Ulrich Hocker said via e-mail. “The three also sit on a similar panel at Scania, a direct competitor of MAN. That in itself is enough of a reason to reject their proposed election.”

VW expects greater control of MAN to reduce costs by about 1 billion euros ($1.4 billion) a year by sharing research and development activities. The maker of the Golf hatchback is offering 95 euros for each MAN common share and 59.90 euros per preferred share in a public takeover bid that began May 31.

‘Inappropriate’ Bid

MAN fell 6 cents, or 0.1 percent, to 93.74 euros yesterday, valuing the company at 13.6 billion euros. The company has gained 5.3 percent this year. VW has gained 8.7 percent.

Goldman Sachs Group Inc., which advises MAN, dismissed the bid as “inappropriate,” according to a letter to the truckmaker dated June 7. VW’s cash offer expires June 29. The manufacturer aims to boost its holding in MAN to as much as 40 percent to control a majority at shareholder meetings. The truckmaker’s workers are concerned that too deep an integration with rival Scania may dilute the company’s products.

“VW has to ensure that MAN and Scania will keep their brand identity,” said Erich Schwarz, an MAN board member who’s the top labor representative at the company’s Austrian truckmaking division. “We’re not in the business of building a common truck. Engines and drivers’ cabs determine the face of the brands. They’ve got to be developed separately.”

--Editor: Chris Reiter, Chad Thomas

To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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