VW Group to take full stake in Audi as profits soar
02 March 2020
2 March 2020
Volkswagen Group (VW) is to take full ownership of the Audi brand, as it announces increased profits and an agreement with consumer groups over the Dieselgate scandal.
The German carmaker already owns 99.64% of Audi and intends to acquire the remaining 0.36%, currently publically owned, through a ′squeeze-out' movement as defined by German law. By doing this, the group intends to make Audi its ′lead development brand'.
′Given the strong dynamics of change in our industry, we are pooling our strengths in the Volkswagen Group and positioning ourselves competitively for the future,' says VW and Audi chairman, Herbert Diess. ′Going forward, the Audi brand with Markus Duesmann as its new CEO will take over the lead for research & development in the Volkswagen Group and thus swiftly assume technical leadership.'
As the automotive industry transforms, with carmakers collaborating on new ventures, the phasing out of internal combustion engines, and mobility services rising in popularity, VW believes this move will help it respond more proactively. Audi will remain a stock corporation and will retain a legal form compatible with the capital market. Employee co-determination will remain unaffected.
Taking Audi into 100% ownership will allow VW to use the premium brand as a launchpad for new technologies and developments while allowing technology trades between other group-owned marques to be easier and quicker. The VW brand is the group's driving force, while other owned subsidies are not as advanced or in as strong a market position to take risks associated with some development paths.
′It is exactly the right way not to stick to the organisational status quo, but to consistently exploit the advantages of the Group's network,' adds outgoing Audi CEO Bram Schot. ′With a greater job split at the Group, we can manage future issues more agilely and flexibly. The new structure will strengthen Audi's role within the Volkswagen Group and recharge Vorsprung durch Technik.'
A resolution on the squeeze-out, according to German stock corporation law, is to be passed by this year's Audi annual general meeting. Due to this, the company has announced it will postpone the event until July or August this year.
The German carmaker can plan for this acquisition thanks to its strong performance last year, in which it defied the global downturn in the automotive industry and rode out the wave of costs related to electric-vehicle (EV) development, posting a 17% rise in profits.
Pre-tax earnings were up €2.8 billion to €18.4 billion in 2019, with the manufacturer saying it would increase its dividend payment by more than a third to €6.50 per ordinary share.
′Our attractive product portfolio convinced many customers, allowing us to expand our position in an overall declining market,' said Frank Witter, VW's chief financial officer. He added that the company, which sold almost 11 million cars last year, was still ′very robust.'
VW also expects car sales in 2020 to rise 4%, despite a challenging market that has seen sales in Asia plummet due to the coronavirus outbreak.
VW's positive financial results seem to have unlocked the ability to spend money where required.
The carmaker has agreed on the negotiated settlement figure of €830 million with the Federation of German Consumer Organisations (VZBV), in connection with a class-action lawsuit over the Dieselgate scandal.
Talks collapsed last month over the issue of a flat €50 million fee demanded by the VZBV to carry out the settlement on behalf of consumers. The company can now distribute the €830 million to drivers impacted by the emissions-cheating scandal in 2015.
′It is good that we are now able to offer consumers a settlement in conjunction with the Federation of German Consumer Organisations after all,' says Manfred Döss, chief corporate counsel at VW.
′This confirms that the settlement in these proceedings is a reasonable solution for everyone – customers, the judiciary and Volkswagen. Independent monitoring of the implementation and transparent processing of the settlement were priorities for both sides, and both will be ensured. For this reason, Volkswagen will also provide legal advice as required and on request. Also, we will establish an independent ombudsperson's office to handle any disputes.'