Structure and Business Activities
This chapter describes the legal and organizational structure of the Volkswagen Group and explains the material changes in 2022 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. Our core 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, Commercial Vehicles and Power Engineering business areas.
The Passenger Cars Business Area primarily 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. The collaboration between the commercial vehicle brands is coordinated within TRATON SE.
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, Poland, Mexico, Türkiye and Czech Republic.
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 eleven board-level management functions starting from January 1, 2022. In addition to the “Chair of the Board of Management”, a function which also includes the “Volume” brand group, the other Board functions were “Purchasing”, “Technology”, “Finance”, “Human Resources and Truck & Bus”, “Integrity and Legal Affairs”, “Premium”, “Sport & Luxury”, “IT”, “China” and “Volkswagen Passenger Cars”. A new “Group Sales” function was created with effect from February 1, 2022.
As of September 1, 2022, the Volkswagen Group refined its Group management. The Board of Management was streamlined and the division of responsibilities was reorganized. As a result, the “Purchasing” and “Group Sales” Board functions were dissolved. Furthermore, the “Volkswagen Passenger Cars” function was renamed “Volume”. Since then, responsibilities have been divided among ten board-level management functions. In addition to the “Chair of the Board of Management”, the other Board functions are “Technology”, “Finance”, “Human Resources and Truck & Bus”, “Integrity and Legal Affairs”, “Volume”, “Premium”, “Sport & Luxury”, “IT” and “China”. The Chair of the Board of Management is also responsible for “Sport & Luxury”.
Directly attached to the Board are a number of Group Management functions that act as an extension to the board-level management functions. These comprise “Group Sales”, “Group Production”, “Procurement” and “Technical Architecture” functions.
The allocation of responsibilities on the Board of Management is based on the schedule of responsibilities decided by the Supervisory Board, which takes into account the changes in management during the reporting period. The way this is structured helps the Board of Management to focus on key tasks such as strategy, central decisions on the Company’s direction, capital allocation and financial requirements. The task of the extended board-level management functions is to leverage synergies in the Group and to connect the brands and divisions.
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 verify that they still align with our corporate strategy and to further increase the efficiency of their decision making. This reduces complexity and reinforces governance within the Group.
The matrix of brand groups and technology platforms created under the Group Steering Model base initiative from the NEW AUTO Group strategy was enhanced in both dimensions during the reporting period. This involved both strengthening the brand groups and creating new units for key technology areas of the future within our strategic technology platforms. The Group steering model will be further refined in future on this basis.
The Volume brand group comprises the Volkswagen Passenger Cars, ŠKODA, SEAT/CUPRA and Volkswagen Commercial Vehicles brands. The Premium brand group comprises the Audi, Lamborghini, Bentley and Ducati brands. The Sport & Luxury brand group consists of the Porsche brand. The company responsible for this brand, Dr. Ing. h.c. F. Porsche AG, has been listed on the stock market since the end of September 2022. In the Truck & Bus brand group, TRATON SE acts as the umbrella for the Scania, MAN, Volkswagen Truck & Bus and Navistar commercial vehicles brands. TRATON SE is also a listed company.
As well as strengthening the brand groups, the reorganization and creation of new units enabled substantial progress with the Software, Battery & Charging and Mobility Solutions technology platforms in the reporting period. The software subsidiary CARIAD was further expanded, getting a subsidiary of its own in China, among other things.
In addition to this, Volkswagen founded PowerCo SE in the reporting period as part of the Battery & Charging technology platform. This company will be responsible for the Group’s global battery business. In addition to producing battery cells, it will also take on other activities along the battery value chain in future.
In the Mobility Solutions technology platform, Volkswagen strengthened the Group’s expertise in advanced fleet management through the equity investment in the Europcar Mobility Group in the reporting period. The aim is to be able to achieve even better coverage of all customers’ mobility needs based on a new mobility platform.
We are convinced that our corporate structure, which efficiently connects not only the brand groups but also the technology platforms, will enable us to make better use of existing expertise and economies of scale, leverage synergies more systematically and accelerate decision making. Clear responsibilities and a high degree of business responsibility in the brand groups and technology platforms will enable comprehensive implementation of the Group’s NEW AUTO strategy.
Each brand within the Volkswagen Group is managed by a brand board of management, which is responsible for 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 Volkswagen AG 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.
MATERIAL CHANGES IN EQUITY INVESTMENTS
In 2021, together with investment firm Attestor Limited and Pon Holdings B.V., Volkswagen made a joint public takeover offer for the shares of Europcar Mobility Group S.A., Paris/France through the consortium company Green Mobility Holding S.A. (GMH) based in Strassen/Luxembourg. The European Commission issued final antitrust approval at the end of May 2022. During the extended offer period, the French Financial Markets Authority gave Europcar shareholders the opportunity to tender their shares to the consortium company. In total, 93.6% of Europcar’s shareholders accepted the offer. The consortium jointly assumed control of Europcar in mid-June 2022. Because the acceptance rate was over 90%, a squeeze-out was initiated for the remaining Europcar shares in July 2022, and the company was delisted. Since July 13, 2022, the consortium company has held 100% of the shares in Europcar. The purchase price was 51 cents per Europcar share. In addition, Volkswagen is the writer of put options held by the other members of the consortium, and the other members have granted Volkswagen call options on their shares in the consortium company. The options with Attestor were extended on a long-term basis in December 2022. Since joint control has been contractually agreed, the company, in which Volkswagen holds 66% of the shares, will be accounted for using the equity method in the Volkswagen consolidated financial statements.
Following the fulfillment of all closing conditions, Brose Fahrzeugteile SE & Co. Kommanditgesellschaft (Brose) and Volkswagen Finance Luxemburg S.A., a subsidiary of Volkswagen AG, created a jointly operated company in early 2022 for the development and manufacture of complete seat units, seat structures and components, and solutions for vehicle interiors. As part of this arrangement, Brose acquired half of the shares in the previous Volkswagen Group company SITECH Sp. z o.o., Polkowice/Poland. Brose and Volkswagen each hold 50% of the jointly operated company – Brose Sitech Sp. z o.o. – with Brose taking the industrial lead and controlling the company.
Since late September 2022, non-voting preferred shares of Dr. Ing. h.c. F. Porsche AG (Porsche AG) have been traded in the Regulated Market of the Frankfurt Stock Exchange. The no-par value bearer shares came from the portfolio of Porsche Holding Stuttgart GmbH, Stuttgart – a wholly owned subsidiary of Volkswagen AG. Following the early termination of the stabilization period, the total number of preferred shares issued in the IPO equated to 24.2% and comprised 110,080,801 preferred shares. The control and profit and loss transfer agreement between Volkswagen AG and Porsche AG ended in accordance with section 307 of the Aktiengesetz (AktG – German Stock Corporation Act) on December 31, 2022.
In connection with the IPO, Volkswagen additionally sold an interest of 25% of Porsche’s ordinary shares plus one ordinary share to Porsche Automobil Holding SE, Stuttgart. As of the reporting date, Volkswagen held 75.4% of the total capital.
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.