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Group Management Report Structure and Business Activities 91

Structure and Business Activities

This chapter describes the legal and organizational structure of the Group and explains the material changes in 2020 with respect to equity investments.

OUTLINE OF THE LEGAL STRUCTURE OF THE GROUP wagen Commercial Vehicles – are independent legal Volkswagen AG is the parent company of the Volkswagen entities. Group. It develops vehicles and components for the Group’s The Automotive Division comprises the Passenger , brands, but also produces and sells vehicles, in particular Commercial Vehicles and Power Engineering business areas. passenger cars and light commercial vehicles for the Volks- The Passenger Cars Business Area essentially consolidates wagen Passenger Cars and Volkswagen Commercial Vehicles the ’s passenger brands and the Volks- brands. In its capacity as parent company, Volkswagen AG wagen Commercial Vehicles . Activities focus on the holds direct or indirect interests in AG, SEAT S.A., ŠKODA development of vehicles, engines and vehicle software, the AUTO a.s., Dr. Ing. h.c. F. AG, SE, Volkswagen production and sale of passenger cars and light commercial Financial Services AG, Volkswagen Bank GmbH and a large vehicles, and the genuine parts business. The product port- number of other companies in and abroad. More folio ranges from compact cars to luxury vehicles and also detailed disclosures are contained in the list of shareholdings includes motorcycles, and is supplemented by mobility in accordance with sections 285 and 313 of the Handels- solutions. gesetzbuch (HGB – German Commercial Code), which can be The Commercial Vehicles Business Area primarily com- accessed at www.volkswagenag.com/en/InvestorRelations.html prises the development, production and sale of trucks and and is part of the annual financial statements. buses from the Scania and MAN brands, the corresponding Volkswagen AG is a vertically integrated energy supply genuine parts business and related services. The commercial company as defined by section 3 no. 38 of the Energie- vehicles portfolio ranges from light vans to heavy trucks and wirtschaftsgesetz (EnWG – German Energy Industry Act) and buses. The collaboration between the two commercial vehicle is therefore subject to the provisions of the EnWG. In the brands is coordinated within TRATON SE, which is listed on electricity sector, Volkswagen AG generates, sells and distri- the stock exchange. butes electricity as a group together with its subsidiaries. The Power Engineering Business Area combines the large- The Volkswagen AG Board of Management has sole bore diesel engines, turbomachinery, special gear units, and responsibility for managing the Company. The Supervisory propulsion components businesses. Until October 2020, it Board appoints, monitors and advises the Board of Manage- also included the business of . ment; it is consulted directly on decisions that are of funda- The activities of the Financial Services Division comprise mental significance for the Company. dealer and customer financing, vehicle leasing, direct banking and insurance activities, as well as fleet management and ORGANIZATIONAL STRUCTURE OF THE GROUP mobility offerings. The Volkswagen Group is one of the leading multibrand With its brands, the Volkswagen Group is present in all groups in the . The Company’s business relevant markets around the world. The key sales markets activities comprise the Automotive and Financial Services currently include Western Europe, China, the USA, Brazil, divisions. All brands within the Automotive Division – with Russia, Poland, Turkey and Mexico. the exception of the Volkswagen Passenger Cars and Volks-

92 Structure and Business Activities Group Management Report

Volkswagen AG and the Volkswagen Group are managed by Board of Management of Volkswagen AG, as well as with the the Volkswagen AG Board of Management in accordance with agreements in the brand groups. This allows Group-wide the Volkswagen AG Articles of Association and the rules of interests to be pursued, while at the same time safeguarding procedure for Volkswagen AG’s Board of Management issued and reinforcing each brand’s specific characteristics. Matters by the Supervisory Board. that are of importance to the Group as a whole are submitted Accordingly, responsibilities were divided between eight to the Group Board of Management to be agreed upon, to the Board of Management positions until December 31, 2020. In extent permitted by law. The rights and obligations of the addition to the Chairman of the Board of Management, which statutory bodies of the relevant brand company remain also includes the Volume brand group, the other Board unaffected. positions were: Components and Procurement, Finance and The Volkswagen Group companies are managed solely by IT, Human Resources and Truck & Bus, Integrity and Legal their respective managements. The management of each Affairs, Premium, Sport & Luxury as well as China. As of individual company takes into account not only the interest December 31, 2020, the board member for Finance and IT was of its own company but also the interests of the Group, the also responsible for Components and Procurement on a relevant brand group and the individual brands in accor- temporary basis, and the Chairman of the Board of Manage- dance with the framework laid down by law. ment was also responsible for China. In addition, at Group level, Board of Management com- In December 2020, the Supervisory Board decided to split mittees address key strategic issues relating to products, up the responsibility for Components and Procurement from technologies, investments, digital transformation, integrity January 1, 2021, replacing it with two new Board positions: and compliance, risk management, human resources and Purchasing and Technology. The new Technology Board management issues. We constantly revise and optimize the position will be responsible for all Group Components activi- committees in order to review their relevance and further ties worldwide, the marketing of the Volkswagen platforms to increase the efficiency of their decision making. This reduces third parties, the development and manufacturing of battery complexity and reinforces governance within the Group. cells as well as the associated procurement, the areas of The Best Governance module of our future program charging and charging systems and the corresponding joint TOGETHER 2025+ is fostering our Company’s transformation. ventures worldwide. One of its aims is to further improve manageability of the The Volume brand group comprises the Volkswagen Group and to make even better use of synergy effects. The Passenger Cars, SEAT, ŠKODA and Volkswagen Commercial establishment of the Car.Software Organisation was just one Vehicles brands. The Audi, and Ducati brands way of further enhancing management of the Group in the are brought together in the Premium brand group. Sport & reporting year. Luxury is comprised of the Porsche, and brands. Bentley will be allocated to the Premium brand group MATERIAL CHANGES IN EQUITY INVESTMENTS as of March 1, 2021. The Truck & Bus brand group is the As part of the planned squeeze-out at AUDI AG under the umbrella for the Scania and MAN brands. German Stock Corporation Act, Volkswagen AG announced We are convinced that this management model will allow on June 16, 2020 that the cash settlement for the transfer of better use of existing expertise and economies of scale, boost shares held by minority shareholders had been set at synergy effects more systematically and accelerate decision €1,551.53 per share. On July 31, 2020, the Annual General making. In addition, it will prepare the Volkswagen Group for Meeting of AUDI AG approved the squeeze-out under stock a management structure that is simpler, leaner and more corporation law at AUDI AG and thus the transfer of all effective, and strengthen the brands, giving them more outstanding Audi shares to Volkswagen AG. This resolution autonomy. In line with the principle of subsidiarity, decisions took effect upon its entry in the commercial register on will be taken at the lowest competent level, close to business November 16, 2020. In December 2020, a former shareholder operations, improving collaboration between the brands and of AUDI AG initiated award proceedings against Volks- the Group as a whole, leveraging synergies and ensuring that wagen AG at the Munich I Regional Court, asking the court to management of the Group is a shared undertaking. review the amount of the cash settlement offered by Volks- Each brand within the Volkswagen Group is managed by a wagen AG. brand board of management, which ensures the brand's On October 6, 2020, the Volkswagen Group completed the independent and self-contained development and business sale of its 76% interest in Renk AG following the required operations. To the extent permitted by law, the board adheres regulatory approvals. The sale price was €0.5 billion. to the Group targets and requirements laid down by the Group Management Report Structure and Business Activities 93

LEGAL FACTORS INFLUENCING BUSINESS GROUP CORPORATE GOVERNANCE DECLARATION Like other international companies, the business of Volks- The Group Corporate Governance Declaration can be found wagen companies is affected by numerous laws in Germany in this annual report and is permanently available on our and abroad. In particular, there are legal requirements website at www.volkswagenag.com/en/InvestorRelations/cor- relating to development, products, production and distri- porate-governance/declaration-of-conformity.html. bution, 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.

VOLKSWAGEN AG SHAREHOLDINGS GROUP CORPORATE GOVERNANCE DECLARATION www.volkswagenag.com/en/InvestorRelations/news-and-publications/ www.volkswagenag.com/en/InvestorRelations/corporate-governance/declaration- Financial_Statements.html of-conformity.html