Payouts to shareholders have drawn elevated public scrutiny during a time when governments and central banks are mustering unprecedented financial aid packages to prevent economic collapse. The outbreak has ground industrial output to a trickle as automakers and other manufacturers halt production.
The company has signaled it can endure production shutdowns in Europe and North America for several weeks without requiring German state-backed emergency funds, thanks to a robust cash pile and existing credit lines.
VW “remains one of the more defensive names in automotive manufacturing, in our view, supported by the automaker’s ability to withstand major economic shocks with only minor damage to credit ratings, akin to peer BMW,” Bloomberg Intelligence analyst Joel Levington said in a report.
Still, with the global economy suffering, and smaller parts suppliers fighting for survival, the timeframe for a market recovery remains uncertain. Daimler’s first-quarter car sales worldwide declined by about 15 percent, according to a person familiar with the matter.
The Chinese market is now gradually recovering as the spread of the virus slows in the region and stay-at-home orders are loosened.
Halting production in Europe and North America costs VW about 2 billion euros per week ($2.2 billion). Some 80,000 of its German workers are on state wage support for reduced working hours. Under the scheme, the state funds the payments from unemployment insurance contributions employees and companies made in the past.
The dividend proposal for 2019, put forward on Feb. 28, would see holders of VW’s widely traded preferred stock receive 6.56 euros for each share held. Common shares would draw 6.50 euros each. The plan would push the payout ratio to 24.5 percent of net profit from the previous 20.4 percent.
VW generated 13.3 billion euros ($14.5 billion) in after-tax earnings attributable to shareholders last year, implying a payout of about 3.3 billion euros ($3.6 billion). Shareholder approval is still pending, and an annual general meeting scheduled for May 7 was postponed.
BMW left its dividend proposal unchanged in documents filed Monday ahead of its own May 14 annual general meeting, set to be an online gathering without physical presence of investors. Like VW, BMW has not tapped state-backed emergency funds, but put about 20,000 German employees on short-term work.
