Structure and Business Activities
This chapter describes the legal and organizational structure of the Volkswagen Group and explains the material changes in 2021 with respect to equity investments.
OUTLINE OF THE LEGAL STRUCTURE OF THE GROUP
Volkswagen AG is the parent company of the Volkswagen Group. It develops vehicles and components for the Group brands, but also produces and sells vehicles, in particular passenger cars and light commercial vehicles for the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands. In its capacity as parent company, Volkswagen AG holds direct or indirect interests in AUDI AG, SEAT S.A., ŠKODA AUTO a.s., Dr. Ing. h.c. F. Porsche AG, TRATON SE, Volkswagen Financial Services AG, Volkswagen Bank GmbH and a large number of other companies in Germany and abroad. More detailed disclosures are contained in the list of shareholdings in accordance with sections 285 and 313 of the Handelsgesetzbuch (HGB – German Commercial Code), which can be accessed at www.volkswagenag.com/en/InvestorRelations.html and is part of the annual financial statements.
Volkswagen AG is a vertically integrated energy supply company as defined by section 3 no. 38 of the Energiewirtschaftsgesetz (EnWG – German Energy Industry Act) and is therefore subject to the provisions of the EnWG. In the electricity sector, Volkswagen AG generates, sells and distributes electricity as a group together with its subsidiaries.
The Volkswagen AG Board of Management has sole responsibility for managing the Company. The Supervisory Board appoints, monitors and advises the Board of Management; it is consulted directly on decisions that are of fundamental significance for the Company.
ORGANIZATIONAL STRUCTURE OF THE GROUP
The Volkswagen Group is one of the leading multibrand groups in the automotive industry. The Company’s business activities comprise the Automotive and Financial Services divisions. All brands within the Automotive Division – with the exception of the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands – are independent legal entities.
The Automotive Division comprises the Passenger Cars Business Area with the Volume, Premium and Sport & Luxury brand groups, as well as the Commercial Vehicles and Power Engineering business areas.
The Passenger Cars Business Area in essence consolidates the Volkswagen Group’s passenger car brands and the Volkswagen Commercial Vehicles brand. Activities focus on the development of vehicles, engines and vehicle software, the production and sale of passenger cars and light commercial vehicles, and the genuine parts business. The product portfolio ranges from compact cars to luxury vehicles and also includes motorcycles, and is supplemented by mobility solutions.
The Commercial Vehicles Business Area primarily comprises the development, production and sale of trucks and buses, the corresponding genuine parts business and related services. The commercial vehicles portfolio ranges from light vans to heavy trucks and buses. Navistar has supplemented the brands in this business area since July 1, 2021. The collaboration between the commercial vehicle brands is coordinated within TRATON SE, which is listed on the stock exchange.
The Power Engineering Business Area combines the large-bore diesel engines, turbomachinery and propulsion components businesses.
The Financial Services Division’s activities comprise dealer and customer financing, vehicle leasing, direct banking and insurance activities, fleet management and mobility services.
With its brands, the Volkswagen Group is present in all relevant markets around the world. The key sales markets currently include Western Europe, China, the USA, Brazil, Russia, Mexico, Poland and Turkey.
Volkswagen AG and the Volkswagen Group are managed by the Volkswagen AG Board of Management in accordance with the Volkswagen AG Articles of Association and the rules of procedure for Volkswagen AG’s Board of Management issued by the Supervisory Board.
Accordingly, responsibilities were divided among ten board-level management functions until December 31, 2021. In addition to the Chair of the Board of Management, a function which also includes the Volume brand group, the other Board functions are Purchasing, Technology, Finance, Human Resources and Truck & Bus, Integrity and Legal Affairs, Premium, Sport & Luxury, IT and China. As of December 31, 2021, the Chair of the Board of Management has also been responsible for China and the board member for Finance has also been responsible for IT. With effect from February 1, 2022, a board member is responsible for IT alone and the board-level function for China has once again been assigned to a specific member of the Board of Management as of August 1, 2022.
In December 2021, the Supervisory Board decided to increase the number of members of the Board of Management and reorganize its structure and functions in the process. A new board-level management function for Volkswagen Passenger Cars was created effective January 1, 2022. A new board-level management function was also created for Group Sales effective February 1, 2022.
The Volume brand group comprises the Volkswagen Passenger Cars, ŠKODA, SEAT/CUPRA and Volkswagen Commercial Vehicles brands. Since March 1, 2021, Bentley has been assigned to the Premium brand group, which previously comprised the Audi, Lamborghini and Ducati brands. Following the departure of Bugatti from the Group’s brand portfolio in November 2021, the Sport & Luxury brand group now consists of the Porsche brand. In the Truck & Bus brand group, TRATON SE acts as the umbrella for the Scania, MAN, Volkswagen Caminhões and Navistar commercial vehicles brands.
Alongside the brand groups, Volkswagen continued to build its software subsidiary CARIAD SE in the reporting year. This company is pooling and expanding the software expertise within the Volkswagen Group and is working toward providing a standardized operating system for Group brand vehicles.
We are confident that this management model will allow better use of existing expertise and economies of scale, boost synergy effects more systematically and accelerate decision making. In addition, it will prepare the Volkswagen Group for a management structure that is simpler, leaner and more effective, while strengthening the brands and giving them more autonomy. In line with the principle of subsidiarity, decisions will be taken at the lowest competent level, close to business operations, thus improving collaboration between the brands and the Group as a whole, leveraging more synergies and ensuring that management of the Group is a shared undertaking.
Each brand within the Volkswagen Group is managed by a brand board of management, which ensures the brand’s independent and self-contained development and business operations. To the extent permitted by law, the board adheres to the Group targets and requirements laid down by the Board of Management of Volkswagen AG, as well as with the agreements in the brand groups. This allows Group-wide interests to be pursued, while at the same time safeguarding and reinforcing each brand’s specific characteristics. Matters that are of importance to the Group as a whole are submitted to the Group Board of Management to be agreed upon, to the extent permitted by law. The rights and obligations of the statutory bodies of the relevant brand company thereby remain unaffected.
The Volkswagen Group companies are managed solely by their respective managements. The management of each individual company takes into account not only the interest of its own company but also the interests of the Group, the relevant brand group and the individual brands in accordance with the framework laid down by law.
In addition, at Group level, Board of Management committees address key strategic issues relating to products, technologies, investments, digital transformation, integrity and compliance, risk management, human resources and management issues. We are continually revising and optimizing the committees in order to review their relevance and further increase the efficiency of their decision making. This reduces complexity and reinforces governance within the Group.
Within the scope of our new Group strategy NEW AUTO, which was adopted in the fiscal year, we are using the Group Steering Model base initiative to enhance our governance model. The objective is to improve the manageability of the Group in unison with the brand groups and to make even better use of overarching areas of synergy. In addition to the further growth of CARIAD, these areas of synergy also include activities in fields such as mechatronics, battery technology and charging infrastructure, and mobility solutions.
MATERIAL CHANGES IN EQUITY INVESTMENTS
In November 2020, TRATON SE (TRATON) and Navistar International Corporation (Navistar), a leading US truck manufacturer, announced the signing of a binding merger agreement. At the end of 2020, TRATON held a 16.7% interest in Navistar. On March 2, 2021, TRATON’s takeover of Navistar was approved by the shareholders of Navistar at their Annual General Meeting. In early July 2021, TRATON acquired all outstanding ordinary shares of Navistar for a purchase price of USD 3.7 billion through a TRATON GROUP company after receiving all the regulatory approvals. TRATON now holds 100% of the shares in Navistar.
The merger of MAN SE (MAN) with TRATON was adopted by resolution of the Annual General Meeting of MAN at the end of June 2021. The merger resolution also brought about the share transfer process in which the MAN shares held by noncontrolling interest shareholders were transferred to TRATON against payment of an appropriate cash settlement (merger squeeze-out). The merger of MAN with TRATON was entered in the commercial register for MAN and TRATON on August 31, 2021. The squeeze-out took legal effect upon entry in the commercial register. This was followed in early September 2021 by the disbursement of the cash settlement of €70.68 per ordinary and preferred share to the noncontrolling interest shareholders of MAN SE, thus completing the MAN SE squeeze-out. The appropriateness of the cash settlement is being reviewed by judicial award proceedings initiated by the noncontrolling interest shareholders who had received a settlement as a result of the squeeze-out.
In 2021, the Volkswagen Group and Rimac Automobili d.o.o., Sveta Nedelja/Croatia (Rimac), established Bugatti Rimac d.o.o., which has its headquarters in Sveta Nedelja. Volkswagen contributed its fully consolidated subsidiaries Bugatti Automobiles S.A.S, Molsheim/France and initially 51% of Bugatti International S.A., Strassen/Luxembourg. Rimac holds 55% of the shares in the company, and Volkswagen holds 45% through Dr. Ing. h.c. F. Porsche AG (Porsche). In addition, Porsche holds a direct interest of 22% in Rimac. Initially, Bugatti Rimac d.o.o. will produce two hypercar models, the Bugatti Chiron and the Rimac Nevera. It is envisaged that further in the future the activities of Bugatti Rimac d.o.o. will focus on a joint product portfolio under the Bugatti brand name with the aim of developing, producing and selling electric-powered, luxury hyper sports cars.
At the end of July 2021, the Volkswagen Supervisory Board approved an agreement with investment firm Attestor Limited and with Pon Holdings B.V. for the submission via a consortium company of a joint public takeover offer for the shares of Europcar Mobility Group S.A., Paris/France. Following a successful review of the offer documents, the French regulator approved the takeover offer at the end of November 2021. The period during which the Europcar shareholders can tender their shares began at the end of November 2021. Together with its two partners, Volkswagen is offering a price of €0.50 per Europcar share through the consortium company. If more than 90% of the shares are tendered, an additional one cent per share will be paid. If the offer is accepted, the consortium – according to current information – will assume joint control of Europcar.
To expand its battery expertise, Volkswagen acquired an interest in Gotion High-Tech Co., Ltd., Hefei (China) through Volkswagen (China) Investment Co. Ltd, making it the largest shareholder of the Chinese battery supplier at 26%. The Group spent a total of €1.2 billion on this transaction. The investment is accounted for using the equity method.
LEGAL FACTORS INFLUENCING BUSINESS
Like other international companies, the business of Volkswagen companies is affected by numerous laws in Germany and abroad. In particular, there are legal requirements relating to services, development, products, production and distribution, as well as supervisory, data protection, financial, company, commercial, capital market, anti-trust and tax regulations and regulations relating to labor, banking, state aid, energy, environmental and insurance law.
GROUP CORPORATE GOVERNANCE DECLARATION
The Group Corporate Governance Declaration can be found in this annual report and is permanently available on our website at www.volkswagenag.com/en/InvestorRelations/corporate-governance/declaration-of-conformity.html.