EU ruling paves way for sports car maker to claim chairmanship
14 February 2007

Porsche is ready to take control of Volkswagen following a ruling in the European Union's top court yesterday that will scrap a German law protecting VW from takeovers.

The advocate general at the European Court of Justice ruled that the so-called "Volkswagen Law" prevented the free flow of capital.

The law was established in the 1960s to prevent foreign takeover of VW, and to safeguard German jobs.

It allowed the German state of Lower Saxony, in which VW is based, and which owns a 20.8 per cent stake in the company, to safeguard VW and have a say in its business.

Porsche, under the guidance of chief executive Wendelin Wiedeking and major shareholder Ferdinand Piech, has steadily been building its share of VW.

Currently it owns 27.4 per cent, and it has plans to buy 29.9 per cent. However, as the law stood, even though Porsche owned almost a third of VW, it could not exercise any more than 20 per cent of the voting rights.

Wiedeking has been vocal in his criticism of VW's protected status. Now it seems certain that Porsche will be able to take both the chairmanship of VW's board and also a controlling interest on its supervisory board.

Though Porsche is a far smaller car maker than VW in terms of volume, it has profits only slightly lower than VW's.

The European Court of Justice's ruling is currently only an initial finding, but it is a near-certainty to become law within the next six months.

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