Volkswagen Law Scrapped By EU : Volkswagen new car review 2008

Volkswagen Law Scrapped By EU : Volkswagen new car review 2008

Volkswagen Law Scrapped By EU
by Anthony Fontanelle
For 47 years, Germany has protected Europe's largest automaker Volkswagen from any hostile takeovers. A German law forbids any firm or individual from acquiring more than 20 percent of Volkswagen's shares. That law though which has stood for almost half a century is now gone as the European Union Court of Justice decided that the legislation should be abolished.The scrapping of the law though is not as severe as it would have been if the leading firm looking to acquire Volkswagen is not a German company. It has been the responsibility of the "Volkswagen law" to keep its control in Germany. Today that the law is no longer valid, Germany is not in danger of losing Volkswagen to a far Eastern competitor or a private equity fund as Porsche, a German automaker is setting its sight on taking control of the giant automaker.The decision of the European Union Court of Justice though sent a clear message to all its member countries. And that is the EU will not be allowing national protectionism get in the way of free movement of capital. Volkswagen is symbolic to Germany since it has risen from the ashes of the Second World War and gave the European country new pride. The European Union made it clear that there will be no scared cows.The EU Court of Justice ruled that the Volkswagen law is discouraging foreign investors to take a stake in Volkswagen as German authorities are exercising considerable influence on the automaker. The state of Lower Saxony is the automaker's second biggest shareholder and it is considered to be the arm of the government operating within the ranks of the listed company."This situation is liable to deter direct investors from other member states," said the court in a statement. Investors are limited to only twenty percent of voting rights even if they own more than 20 percent of the shares of Volkswagen, known for the Beetle and reliable auto parts such as the VW headlight switch, side mirrors, transmission and engines.Porsche has been buying shares of Volkswagen and now owns 31 percent. Now that the Volkswagen law is no longer in place, Porsche can either buy more shares of Volkswagen to take control of the automaker or wait for the company's annual meeting where they can be given total control of Volkswagen. Porsche has ambitious plans for Volkswagen and it can be achieved once it takes control of the company 14 times bigger.It is reported that Porsche is looking to make Volkswagen a strong rival of Toyota in terms of productivity and profitability. Porsche has been known to be a highly profitable automaker with its lineup of upscale vehicles. With the automaker's involvement in the development of new vehicles for Volkswagen, the auto industry can only wait what this development will bring to Volkswagen.