Volkswagen Management May Seek Shareholder Vote to Bypass Board on Overhaul Plan

Volkswagen management is preparing for a critical showdown over its most significant turnaround plan to date, threatening to sidestep its own supervisory board and appeal directly to shareholders if the proposal is blocked at a meeting next week.

The move highlights a deep rift between the automaker's executives and its powerful labor representatives and the state of Lower Saxony, who collectively hold a majority on the supervisory board.

Boardroom Impasse

Volkswagen's supervisory board is scheduled to convene on September 4 to vote on a 40-point restructuring plan proposed by management. According to a Reuters report, the plan aims to revive profits by doubling job cuts, potentially closing factories, and spinning off certain divisions. The automaker is grappling with challenges including U.S. tariffs, declining sales in China, and fierce competition.

This strategy faces stiff opposition from the works council and the government of Lower Saxony, Volkswagen's second-largest shareholder, who have introduced their own proposals that oppose layoffs and factory closures. The management's plan was already rejected by the board in a previous meeting in July.

The Shareholder Gambit

If the board rejects the plan again, management could call an extraordinary general meeting (EGM) as early as October, according to people familiar with the matter. This would be a highly unusual step in Germany's consensus-oriented corporate environment but would fundamentally alter the power dynamics.

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• On the 20-seat supervisory board, labor representatives and Lower Saxony control a majority of 12 seats, allowing them to block management's plans.
• At a shareholder meeting, voting power is distributed differently. The Porsche and Piech families hold 53.3% through Porsche SE, Qatar holds 17%, and Lower Saxony holds 20%. Labor unions have no direct vote.

This shareholder structure could put management within reach of the 75% majority typically required for major structural decisions in Germany, effectively breaking the deadlock.

Legal Hurdles and Potential Compromise

A direct appeal to shareholders is not without complications. The "Volkswagen Law" stipulates that major actions like spin-offs require more than 80% shareholder approval, giving Lower Saxony an effective veto with its 20% stake. However, management could reportedly invoke Article 111 of Germany’s Stock Corporation Act, which could lower the threshold to a 75% majority if an EGM is called against the board's wishes, potentially triggering a legal battle.

Talks are still ongoing ahead of the board meeting. The board's executive committee is set to meet on September 3 to seek a potential compromise, which sources familiar with the talks said could focus on the scale of job cuts and the future of at-risk factories.