FRANKFURT -- Volkswagen Group will not buy into a new share issue by SGL, reducing its stake in the German carbon-fiber maker and allowing rival BMW Group more control over one of its key materials suppliers.
BMW and Susanne Klatten, one of the carmaker's largest shareholders, will participate in the fundraising to maintain their current shareholdings, while VW and engineering group Voith will not inject cash, SGL said.
VW, which is facing billions in fines and costs in the wake of a scandal involving rigged emission tests, said in a statement that providing cash to SGL would "not make sense in light of the current situation at Volkswagen."
VW is, however, not looking to cut its stake further, SGL said.
SGL, which competes with Japan's Toray and Solvay's Cytec in carbon fiber materials, will increase its capital by close to one third, with 40 existing SGL shares entitling shareholders to buy 13 new shares for 6 euros apiece.
This would result in a reduction of VW's stake to 7.4 percent, down from close to 10 percent at the moment. BMW and Klatten's investment vehicle Skion will continue to hold about 18.4 percent and 27.4 percent respectively.
SGL said Voith currently holds between 5 and 10 percent, without being more specific.
SGL, which has this year sold its struggling graphite electrodes business, said on Tuesday it would use expected proceeds from the share sale of 180 million euros, as well as proceeds of at least 200 million from the graphite electrodes sale, to cut debt and gain some financial flexibility.
"We expect to better balance the volatility in our business," it said in the statement.
The graphite electrodes business, once SGL's largest profit driver, has been eviscerated by Chinese competition and a slump in scrap metal recycling, the main use for the electrodes.
Automakers were initially attracted to SGL by its carbon fiber product, which is used in light-weight components for BMW's "i" subbrand models, the i3 EV and i8 plug-in hybrid, as well as VW's Audi R8 sports cars.
While carbon fiber reinforced parts have become standard materials in aircraft and wind turbine rotors, the auto industry's uptake has lagged expectations. BMW has recently limited its use of the costly material, turning to cheaper aluminum and specialty steel.