US investment firm Brandes ups Volkswagen stake to 10,7 per cent

FRANKFURT – US-based asset manager Brandes Investment Partners LLC has increased its voting stake in Volkswagen to 10,65 per cent, becoming the German carmaker’s second-biggest investor, Volkswagen said yesterday.

No immediate comment was available from Brandes on the move, although private investors’ rising prevalence among Volkswagen’s top shareholders could step up pressure on management to cut costs and shore up profits. In a disclosure statement, Europe’s biggest carmaker said Brandes’s stake held for clients had surpassed the 10 per cent reporting threshold as of July 23 – the day Volkswagen cut its earnings target for 2004.Brandes, founded in 1974, specialises in picking stocks it thinks are trading below their true worth, the so-called value approach to investing.It had some US$82,7 billion (N$496,2 billion) under management as of March 31, according to its Web site.Volkswagen said in January that Brandes held a 6,15 per cent stake.Brandes’s European arm referred questions on the matter to headquarters in California, where no one was immediately available.Volkswagen, whose shares have underperformed the DJ Stoxx European car index by more than one-quarter this year and are its worst-performing stock, eased 0,3 per cent by 1320 GMT while the index fell one per cent.VW spokesman Frank Gaube said the company was happy to count Brandes as a major investor.”From our side it is good that we see people having a positive view on the long-term prospects of Volkswagen,” he said, adding the move would not affect the carmaker’s talks on selling a big stake to the Gulf emirate of Abu Dhabi.”We are still talking (to Abu Dhabi officials),” he said, adding that nothing had been finalised.Volkswagen plans to sell Abu Dhabi a block of treasury stock that Gaube said represented around 9,8 per cent of its shares and 13,6 per cent of its voting rights.The German state of Lower Saxony – Volkswagen’s home – owns around 18,8 per cent of the company’s voting rights, making it the biggest investor.Should the sale to Abu Dhabi proceed, Brandes would slip to third-biggest investor by voting rights.Gaube declined to comment on whether VW may face more pressure to boost returns to investors should two private-sector investors emerge as major shareholders.Last month, Volkswagen slashed its 2004 profit target after weak first-half earnings and now aims for an operating profit of 1,9 billion euros (US$2,29 billion) before special items.VW is battling weak German car sales and severe problems in North America, where the impact of the strong euro, a price war in the United States and an ageing model range led to a first-half operating loss of 503 million euros, which it says could widen in the second half.CSFB analyst Harald Hendrikse said Brandes seemed to believe that Volkswagen would be able to make progress with its ForMotion cost-savings programme.If so, the stock now looks “mega-cheap” given the way operating income gains translate to the bottom line, he added, calculating that each 100 million euros in operating improvements could add 20 or 25 cents to earnings per share.VW trades at about 11,6 times estimated earnings for 2004, above volume carmakers like Renault and PSA Peugeot Citroen, but below German peer DaimlerChrysler, according to Reuters data.-Nampa-ReutersIn a disclosure statement, Europe’s biggest carmaker said Brandes’s stake held for clients had surpassed the 10 per cent reporting threshold as of July 23 – the day Volkswagen cut its earnings target for 2004.Brandes, founded in 1974, specialises in picking stocks it thinks are trading below their true worth, the so-called value approach to investing.It had some US$82,7 billion (N$496,2 billion) under management as of March 31, according to its Web site.Volkswagen said in January that Brandes held a 6,15 per cent stake.Brandes’s European arm referred questions on the matter to headquarters in California, where no one was immediately available.Volkswagen, whose shares have underperformed the DJ Stoxx European car index by more than one-quarter this year and are its worst-performing stock, eased 0,3 per cent by 1320 GMT while the index fell one per cent.VW spokesman Frank Gaube said the company was happy to count Brandes as a major investor.”From our side it is good that we see people having a positive view on the long-term prospects of Volkswagen,” he said, adding the move would not affect the carmaker’s talks on selling a big stake to the Gulf emirate of Abu Dhabi.”We are still talking (to Abu Dhabi officials),” he said, adding that nothing had been finalised.Volkswagen plans to sell Abu Dhabi a block of treasury stock that Gaube said represented around 9,8 per cent of its shares and 13,6 per cent of its voting rights.The German state of Lower Saxony – Volkswagen’s home – owns around 18,8 per cent of the company’s voting rights, making it the biggest investor.Should the sale to Abu Dhabi proceed, Brandes would slip to third-biggest investor by voting rights.Gaube declined to comment on whether VW may face more pressure to boost returns to investors should two private-sector investors emerge as major shareholders.Last month, Volkswagen slashed its 2004 profit target after weak first-half earnings and now aims for an operating profit of 1,9 billion euros (US$2,29 billion) before special items.VW is battling weak German car sales and severe problems in North America, where the impact of the strong euro, a price war in the United States and an ageing model range led to a first-half operating loss of 503 million euros, which it says could widen in the second half.CSFB analyst Harald Hendrikse said Brandes seemed to believe that Volkswagen would be able to make progress with its ForMotion cost-savings programme.If so, the stock now looks “mega-cheap” given the way operating income gains translate to the bottom line, he added, calculating that each 100 million euros in operating improvements could add 20 or 25 cents to earnings per share.VW trades at about 11,6 times estimated earnings for 2004, above volume carmakers like Renault and PSA Peugeot Citroen, but below German peer DaimlerChrysler, according to Reuters data.-Nampa-Reuters