Shareholders Fret Over Volkswagen's Scania Cost Cuts

[kscarbel]

Wall Street Journal / August 14, 2013

STOCKHOLM—Volkswagen is facing criticism by a Swedish investor group that is raising concerns about the German auto giant's plan to squeeze synergies from its commercial-vehicle operations, including Scania AB.

The Swedish Shareholders Association on Wednesday questioned Volkswagen's plan to cut about €200 million ($265 million) in annual costs by combining some Scania operations with German truck maker MAN SE and its own commercial vehicle division.

Volkswagen owns about 60% of Scania's shares and took control of MAN in July. The Swedish investor group is worried that finding synergies between the two companies will cost Scania shareholders dearly.

Volkswagen in the past has said it aims to create "substantial synergies in the areas of procurement, development, and production" among the three operations.

"Scania's shareholders have been steamrollered by Volkswagen…and we are concerned that it is now happening again," Carl Rosen, chief executive of the Swedish Shareholders Association, said at a news conference in Stockholm on Wednesday.

Mr. Rosen said he is concerned that technology, trade secrets and other assets will be transferred from Scania to other parts of the German auto maker's empire at the expense of the Swedish truck maker's minority shareholders.

"You cannot steal a company's trade secrets without paying for them," Mr. Rosen said. "That is what this is about."

Under Swedish law, Mr. Rosen's association would need to gain support for an investigation that would be conducted an independent party from 10% of its shareholders. It has started lobbying Scania's institutional minority stakeholders to sign up for the review. Mr. Rosen said he is confident he will get the support needed, which would lead to an extraordinary general meeting for Scania being called in to assign an investigator to review its complaints.

Scania spokesman Hans-Åke Danielsson said the company cannot comment on ownership, but said "everything that Scania does is intended to be beneficial to all Scania shareholders. Obviously, we will not do anything that doesn't benefit all shareholders."

Volkswagen will "comply with Swedish law and regulations and act in the interest of all shareholders," a Volkswagen spokesman said.

Scania's market capitalization is currently about 111 billion Swedish kronor ($17 billion).

While the shareholder's organization covers a broad swath of investor interests in Sweden, it represents some smaller Scania investors and, along with other minority shareholders, has taken issue with Volkswagen's recent activities related to its Scania investment.

Earlier this year, for instance, several institutional shareholders were angered by Volkswagen's drive to kill a nomination committee tasked with finding candidates for Scania's board.

At Scania's annual general meeting, the Swedish Shareholders Association argued adamantly to keep the committee in place, but although 15 of Scania's 20 largest shareholders voted against the proposal to scrap it, the majority owner didn't budge.