Porsche SE May Block VW Dividend Payout

The holding company that controls Volkswagen Group plans a board meeting on Monday to decide whether to block VW’s plan to issue a dividend for 2015, sources tell Reuters. The carmaker’s annual meeting will be held on June 22.

VW previously proposed to slash the dividends about 97% for ordinary and preferred shares to €0.11 and €0.17, respectively. But Porsche Automobil Holding SE, which owns 52% of VW’s voting shares, argues against any dividend because of the unknown liabilities associated with VW’s diesel emission cheating scandal.

VW has set aside €16 billion ($18 billion) for recall and legal costs. Analysts say the total could easily climb significantly higher.

Reuters notes that, if VW failed to pay a dividend for two consecutive years, German law would grant preference shareholders voting rights. The change would dilute the control of VW’s founding Porsche and Piech families, which are represented by Porsche SE.

Such a change in voting rights also would immediately erode the influence of the state of Lower Saxony, a 24% shareholder. Critics say the regional home of VW has held back company reforms for the sake of preserving jobs.