Ferdinand Piech has been a master at wooing customers since he became Volkswagen AG's chief executive in 1993.
He has doubled annual sales to 5.06 million vehicles, making Volkswagen the largest automaker in Europe, Brazil and China as well as the biggest European brand in the US.
In the second quarter of this year, Volkswagen's sales rose 9.6 percent to 23.7 billion euros(US$20.9 billion).
Profit was 624 million euros under International Accounting Standards.
Piech has failed to generate the same level of excitement among shareholders. In the 12 months through July 26, Volkswagen common shares rose 14 percent to 52.08 euros (US$45.83), while the DAX Index fell 22 percent. Yet Volkswagen's market value is just US$15.6 billion -- 32 percent less than that of German rival Bayerische Motoren Werke AG, even though it sells seven times more cars.
Because of that low market value, Piech, 64, is spending his last year before retirement shoring up antitakeover defenses, even as the European Commission is moving to strip them from German law.
"Before I leave, I see it as my task to see to it that with or without the statutes, no one can swallow our group without choking on it," Piech told business weekly WirtschaftsWoche in May.
Volkswagen would not make Piech available for interviews for this article.
Piech's campaign to cement control runs counter to a rising tide of shareholder discontent. In June, officials of Frankfurt-based Union Investment GmbH confronted Piech on the floor of Volkswagen's annual shareholder meeting in Hamburg. They pressed him to buy back nonvoting preferred shares instead of ordinary shares, which are 53.2 percent more expensive.
Volkswagen's chief executive Ferdinand Piech is one of the best engineers in the history of the automobile and masterful at attracting customers. But the company's market value is just US$15.6 billion -- 32 percent less than its major rival, even though it sells seven times more cars, and he has failed to generate the same excitement among his shareholders. Product-ivity lags because unions limit the workweek, in most cases, to 28.8 hours.
"They've done a few things in the interest of shareholders, but they need to do a lot more," says Rolf Drees, spokesman for Union, which manages US$102 million worth of Volkswagen common shares and US$68 million in preferred shares.
Though guards kept a lookout for food missiles and other projectiles as shareholders entered the meeting, the outcome of the vote wasn't in doubt. Volkswagen's home state of Lower Saxony, protected by a 1960 law giving it an effective veto over most strategic decisions, cast 52 percent of all votes represented at the meeting.
Shareholders approved Piech's buyback and authorized him to sell new shares in a potential US$$2.2 billion capital increase -- even though he refused to say how he'd use the money.
In June, the European Commission began examining whether the German law that protects Lower Saxony's influence is blocking the flow of capital across borders.
It's investigating similar laws in five other countries.
The Volkswagen case could wind up before the European Court of Justice in Luxembourg within two to three years, says commission spokesman Thomas Kaufmann.
Some global fund managers, meanwhile, are diverting investments to companies with a one-share, one-vote philosophy, says Arndt Ellinghorst, an analyst at WestLB Panmure in Dusseldorf.
"The shares would have an upside potential of 20-30 percent if Volkswagen improved how it treats capital markets," says Ellinghorst.
Even Gary Motyl, chief investment officer at Templeton Institutional Group, whose funds hold US$800 million in Volkswagen shares because he expects double-digit returns in the next few years, recognizes the company's flaws.
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