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BMW and Volkswagen paid huge dividends after the car industry hit freezing point

Publish Date: 2020.05.15

We should not morally kidnap the family behind BMW or Volkswagen to "kill the goose that lays the golden egg" at this moment, but how to deal with the government, the industry and the employees affected in this special period is the question that the families behind these automakers should consider most.


In an unusual period of time, the German car industry and the government should not have a huge dispute.


BMW is understood to be planning to pay a €1.65bn ($1.78bn) dividend to shareholders. The payout is expected to be approved at BMW's annual meeting on Thursday, while the Volkswagen group is expected to distribute more than 3.27 billion euros in 2019 dividends to investors.

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Dividend payouts are supposed to be good for investors, but for Volkswagen and BMW, the two families behind them control the dividend payouts at a time of great controversy.


We all know that BMW and Volkswagen are controlled by the family behind them. Susanne Klatten and her brother Stefan Quandt, controlling shareholders and the youngest children of the German industrialist Herbert Quandt, own 46.8 per cent of the BMW group. Anyone with knowledge of BMW's history will know that Herbert quandt was the cause of BMW's post-war revival, and they will reap a total €730m from the dividend.


Similarly, of the €3.27bn handed out by vw, about €1bn will go into the pockets of porsche and the piech family. The two families' holding companies have just increased their stake in Volkswagen group to 53.3 percent.

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But while the families behind the carmakers are considering how to pay dividends, they are also trying to persuade the government to give the industry more policy support. Senior auto industry officials and unions met with the chancellery in Berlin on May 5 to discuss ways to overcome the economic crisis, a government official said. Berlin has not ruled out a scrappage scheme but has no plans to do so, the person said.


ACEA, a lobby group for European carmakers, has also called on governments to help encourage consumers to buy cars.


Eric-mark Huitema, ACEA director general, said last week: "it is in Europe's interest not only to recover but to reinvigorate this key strategic area in order to make a strong contribution to the eu's industrial strategy, the European green agreement and Europe's innovative leadership in the global market."

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So the huge controversy over the dividend has made the billionaire families that control the BMW and Volkswagen groups an obstacle to their current growth.


Germans want to know why taxpayers' money helped BMW and Volkswagen when they did not abolish shareholder dividends or executive bonuses. The economic impact of the coronavirus pandemic means that many family-owned restaurants and small businesses across the country are facing the loss of their livelihoods, and more of that support should go to those industries.


DWS Group, the money management arm of deutsche bank ag, said BMW should consider reducing expenses to protect its balance sheet. Separately, Germany's DSW investor lobby group said it wants BMW to be more frugal as it seeks state-sponsored incentives to buy cars and send thousands of workers home at reduced wages.

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While the state pays most of its 20,000 or so short-time workers, BMW is paying a big dividend, providing more profit to the family behind it. Although BMW says paying a dividend is crucial to investor confidence. "The reliability of our investors creates trust and maintains BMW's attractiveness as an investment," BMW said in a March 18 statement. But it must be admitted that such an explanation pales here.


It should be noted that on May 14, the PSA group management board and the board of directors of fiat Chrysler automotive group (hereinafter referred to as the "FCA group") respectively decided that due to the current covid-19 outbreak, no common stock dividend for fiscal year 2019 will be paid in 2020. And the dividend, worth 1.1 billion euros, is part of a merger agreement.


As PSA and the FCA pull through by ditching their dividends and the German government continues to bail out the carmakers, BMW and vw struggle to split the profits. Actually from the legal perspective, dividends have no problem, because the dividend belongs to the profit of 2019, BMW and Volkswagen should drink for 2019 years of effort, but in the moral level, the more people are in need of help, more people are in a lifeline to struggle, such bonuses are attracted great disputes.


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We shouldn't morally hold BMW or Volkswagen hostage, because that's what they should be paid, but how to deal with the government, the industry and the affected employees in this particular period is the most important issue for the families behind these automakers.


In fact, BMW is very conservative this year and has very low expectations for the whole market.


Frankfurt - BMW said sales in China rebounded in April, but warned other markets in Europe and the United States that the auto industry would recover "very slowly" from the pandemic. Earlier this month, BMW cut its earnings forecast, citing weaker-than-expected demand that would worsen in the second quarter.

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"There is at least a silver lining from China," Oliver Zipse, BMW's chief executive, said in a speech at the company's annual shareholder meeting on Thursday. This is the first time it has been held in virtual form. "Unfortunately, our largest single market is only used as a limited blueprint for the development of other markets."


BMW said deliveries rose 14% in April, after falling 88% in China in February, due to depressed demand in a market where car ownership is relatively low by global standards. "The European economy, for example, has been affected to varying degrees by the pandemic," says Mr Ziptzer. Demand for cars is likely to recover slowly in countries such as Spain, Italy and the UK. The same is true in the United States."


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