TCI should be pushing on an open door with its litany of complaints about pay, governance and operations at Volkswagen (VW). Chris Hohn's $10-billion activist hedge fund has in the past taken on the likes of Japan Tobacco and Coal India. That puts the German auto producer in some pretty embarrassing company. Yet an acerbic letter on Friday, however on point, can only do so much at a company like VW.
Hohn says he has accumulated a two per cent stake in the Euro 61-billion carmaker. Porsche Automobil Holding SE retains 52 per cent voting rights, and Lower Saxony has 20 per cent. That means there's no chance of seeding a shareholder revolt. What TCI can do, though, is reinforce moves that the controlling owners should already be making in the wake of the diesel-emissions cheating scandal that VW now estimates will cost it Euro 16 billion to Euro 17 billion, or some $19 billion.
That has to be paid for, and fixing a business whose performance "has gone significantly backwards," as TCI puts it, would help. So would reducing compensation habits that led to the "disgrace" of VW handing Euro 63 million to the 12-member management board in 2015, by TCI's tally, while paying just Euro 68 million in dividends. Toughening lax governance that helped allow the emissions debacle to happen in the first place would be another important step.
With new bosses in place at VW, decisions about changes in some of these areas are due over the summer. It may be, therefore, that TCI is just making its views known rather than trying to foment further upheaval.
There is a hint, however, that the family interests in control of the carmaker may share some of Hohn's frustrations. Porsche SE, which allots dividends to the insiders, in April decided abruptly on a far higher payout than initially planned. VW will have to make much more money - and pay it out to shareholders - for Porsche SE to keep that up.
TCI's Japan Tobacco stake, largely sold last year according to Reuters, did better financially than the Coal India campaign. Both illustrate that the fund doesn't shy away from difficult cases. Hohn's best shot at influencing VW, though, may be to keep its top executives under a spotlight of shame.
Hohn says he has accumulated a two per cent stake in the Euro 61-billion carmaker. Porsche Automobil Holding SE retains 52 per cent voting rights, and Lower Saxony has 20 per cent. That means there's no chance of seeding a shareholder revolt. What TCI can do, though, is reinforce moves that the controlling owners should already be making in the wake of the diesel-emissions cheating scandal that VW now estimates will cost it Euro 16 billion to Euro 17 billion, or some $19 billion.
That has to be paid for, and fixing a business whose performance "has gone significantly backwards," as TCI puts it, would help. So would reducing compensation habits that led to the "disgrace" of VW handing Euro 63 million to the 12-member management board in 2015, by TCI's tally, while paying just Euro 68 million in dividends. Toughening lax governance that helped allow the emissions debacle to happen in the first place would be another important step.
More From This Section
There is a hint, however, that the family interests in control of the carmaker may share some of Hohn's frustrations. Porsche SE, which allots dividends to the insiders, in April decided abruptly on a far higher payout than initially planned. VW will have to make much more money - and pay it out to shareholders - for Porsche SE to keep that up.
TCI's Japan Tobacco stake, largely sold last year according to Reuters, did better financially than the Coal India campaign. Both illustrate that the fund doesn't shy away from difficult cases. Hohn's best shot at influencing VW, though, may be to keep its top executives under a spotlight of shame.