Volkswagen defended its corporate governance on Friday amid mounting ire by minority shareholders in Europe's biggest carmaker over the role of Chairman Ferdinand Piech.
US fund manager Tweedy Browne, one of VW's top six shareholders, is so concerned by potential conflicts of interest at VW that it may scrap investments in Germany, the Financial Times reported, citing managing director William Browne.
The paper said the activist fund manager was talking to other Volkswagen shareholders in a bid to force out Piech, whose dual role as head of VW's supervisory board and co-owner of German carmaker Porsche has fuelled a controversy.
Chances of toppling Piech seem slim. By German law, a motion to remove a supervisory board chairman at an annual general meeting requires 75 percent of the votes present.
Porsche became VW's biggest shareholder this year, with 18.5 percent of voting rights, and wants seats on Volkswagen's board proportional to its holding.
Its aim raises questions about whether Porsche may exert improper influence on a company that is a both a business partner and a rival in certain premium segments.
A Volkswagen spokesman declined comment on matters involving the supervisory board but reiterated that the German business icon had adopted safeguards to ensure proper ties with Porsche.
"As has been announced by Dr (Chief Executive Bernd) Pischetsrieder, VW has signed a basic agreement with Porsche. Everything that is important is secured by the arm's-length principle," he said.
The matter came to a head last month when Piech sided with employee representatives on VW's board in blessing their choice of Horst Neumann as new head of personnel against the wishes of Pischetsrieder and VW brand group chief Wolfgang Bernhard.
Neumann worked 16 years for the IG Metall trade union, putting into question how vigorously he would push VW's efforts to cut the highest labour costs in the auto industry as a way to sharpen its competitive edge.
"It is an intolerable kind of situation ... It raises the question of whether you should invest any kind of money in Germany," Browne was quoted by the Financial Times as saying.
Gerhard Cromme, chairman of the German Corporate Governance Code Commission, has already said he will leave VW's board when his term expires in May. A source familiar with the matter linked his departure to the flap over Neumann.
German funds that invest in VW declined to comment.
Volkswagen is the best-performing carmaker stock in Europe this year, up nearly 39 percent, at least in part because of management's intense focus on slashing costs.
Its investment case would be undermined, analysts say, should its efforts to wring out efficiency gains wane.
The VW spokesman played down speculation that Pischetsrieder or Bernhard - the star manager brought in last year to revive the ailing Volkswagen brand - could leave the group now that Piech and his labour allies had flexed their muscles.