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Friday, July 19, 2024 | Back issues
Courthouse News Service Courthouse News Service

EU Fights Germany’s Cushy Volkswagen Deal

(CN) - Europe's executive branch is taking Germany back to court over a law that privatized Volkswagen in 1960, while still giving the German government certain privileges.

Founded by the Nazi trade union in 1937 as the "people's car," Volkswagen became a trust of the West German government and the German state of Lower Saxony after World War II.

Strong sales of Volkswagen, especially its Beetle, contributed to the wirtschaftswunder, or economic miracle of Germany's postwar financial recovery.

A 1960 law privatized the company, but allowed Lower Saxony and the federal government to keep certain rights. Lower Saxony received 20.01 percent of the company's shares.

The government maintained two of 20 seats on the supervisory board. Voting was capped at 20 percent regardless of how many shares an investor held, and changes to the company statutes required a four-fifths majority - measures that benefited the state's ownership share.

The European Commission sued over the law in 2001. The Court of Justice of the European Union, the political bloc's highest tribunal, ruled in 2007 that the Volkswagen law violated free movement of capital.

When Germany changed the law in 2008, it kept the 20 percent blocking provision. Attempts to negotiate stalled, and "the German authorities declined to make further changes to their law in the summer of 2011," according to the commission.

Now the commission is taking Germany back to court, demanding a fine of around $42,000 per day from issuance of the 2007 ruling.

Volkswagen is Europe's largest automobile producer; the company said it would likely surpass sales of five million units this year.

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