What was Ferdinand Piech thinking?
Given an opportunity to tell Volkswagen shareholders that he cares about them - the annual shareholders meeting on May 23 - VW's chairman failed to mention the company's sagging share price in his opening speech or give any indication of what he planned to do about it.
That was enough to send some stockholders ballistic.
'There's no point in VW just making perfect cars. It must also establish a perfect share price,' one shareholder said.
Another said VW needed to enhance its transparency for financial markets.
'Piech missed an opportunity,' said a top European equity analyst who asked not to be named. 'But he is not the type of person who likes to admit mistakes, so it is not surprising that he didn't talk about it.'
Other Europeans are embracing the shareholder in the aftermath of the single currency and a bull market that has seen people get rich by putting their money in other sectors.
Most European carmakers have switched to international accounting standards. They are also trying harder to keep investors informed by meeting more often with analysts. But VW has lagged behind others in the way it handles investor relations.
'They produce a lot of information, but it has been poorly marshalled and poorly decimated,' said a German analyst. 'They tend to dribble information out in the press and don't e-mail analysts directly.
'They've been very arrogant,' he said. 'They've never given an indication that they care about the share price. Some fund managers don't even regard VW has investment grade anymore.'
VW's share price tumbled to a three-year low of around A42 in late February after its 1999 net profit fell by more than 25 percent to DM1.65 billion (A836 million). The company's shares closed last Thursday (June 1) at 44.15.
One problem is that the German state of Lower Saxony owns 20 percent of VW. The emphasis has been on maintaining employment more than enriching shareholders.
But the VW culture under Piech - the ultimate automotive engineer - is different from other companies. While General Motors is full of finance men at the top, VW is a company of car guys. GM's has seen its market share fall, but its stock has done pretty well.
One VW executive admitted recently that '(GM Chairman) Jack Smith builds cars in order to make money; Ferdinand Piech makes money so that he can build cars.'
VW wasn't completely silent on the subject at the shareholder meeting. 'With a substantial improvement in earnings relative to 1999, we also intend to drive our share price back up from its currently unsatisfactory low level,' said VW Chief Financial Officer Bruno Adelt.
Indeed, VW has shown signs of putting a new stress on shareholder relations. Volkswagen announced earlier this year that it would switch from German accounting standards to International Accounting Standards by 2001. It has also installed a chief investor relations officer, Gillian Karrin, who reports to Piech.
One of her first moves was to set up an office in London. VW recently ran an ad in the Financial Times seeking an investor relations specialist in London to assist Karrin.
'The initial indications are good,' said Andrew Blair-Smith of Commerzbank in the UK. 'Their first-quarter conference calls were better and they've improved the website.'
But some critics say VW still doesn't get it. VW executives, on the other hand, claim that equity analysts simply don't understand Piech's long-term brand strategy based on common platforms.
One response has been to have analysts drive VW cars. To Volkswagen, that is a radical approach. Indeed, some fund managers see VW as an awakening bear when it comes to investor relations. Recently, one top Volkswagen executive pointed out to reporters that analysts 'have an amazing influence on share prices' - something Jurgen Schrempp, Jac Nasser and Jack Smith probably already knew.