Dividend despite state aid – car companies are criticized

BMW headquarters

Despite short-time working and an extended production stop, the Munich-based automaker wants to stick to its planned dividend payment.

(Photo: Reuters)

Munich On BMW is reliable. While other Dax companies had to postpone their shareholders’ meetings as a result of the corona pandemic, BMW is holding its 100th general meeting on May 14, as planned. The car manufacturer from Munich wants to maintain continuity even in times of crisis.

As the invitation to the event, which the company sent out on Monday, shows, the owners are asked not to appear in person. You should attend the Annual General Meeting digitally via livestream. Health protection comes first.

The BMW shareholders’ meeting is therefore taking place virtually for the first time, i.e. without a physical presence. Otherwise, everything is as usual. The board of directors and the supervisory board also propose to distribute a total dividend of 1.64 billion euros to the shareholders. Because the vehicle manufacturer has applied for subsidized short-time work for a good 20,000 employees at the same time, the Bavarians stand just as much Daimler or VW in criticism.

“Short-time work allowance is state aid. Those who rely on state aid cannot simultaneously distribute profits to shareholders. That is the ugly face of capitalism. In these cases, I am therefore in favor of a general dividend freeze ”, Carsten Schneider tweeted, parliamentary manager of the SPD parliamentary group, last week.

Dietmar Bartsch, chairman of the Die Linke parliamentary group, recently called in the “Financial Times” to suspend bonus payments and dividend payments if German companies make use of short-time work or other state benefits in the crisis.

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Profit sharing of BMW employees linked to dividends

Many companies have already canceled their planned dividend. The German Protection Association for Securities Ownership expects that even in the best case, the 160 listed companies in Dax, MDax and SDax will only distribute 44 million euros to their shareholders this year due to the corona crisis.

That would be 14 percent less than in the previous year. In the current situation, “securing liquidity has priority first,” says Eric Frère, director of the Institute for Strategic Finance at FOM University.

Nevertheless, there are very good reasons why BMW is sticking to the dividend. The profit sharing of the automaker’s employees is partly linked to the distribution to the shareholders, according to corporate circles. If the owners’ profit sharing is canceled, this automatically reduces the bonus for the employees.

In addition, dividends are per se past. The corporations share their shareholders in the economic success for the 2019 financial year. For 2020, the year in which the corona crisis actually has an impact, the distributions will in many cases be eliminated completely or shrink significantly. In addition, many German companies do not want to lose their reputation as reliable partners on the capital market.

This is doubly important, especially for corporations like Daimler. Unlike BMW or VW, the Stuttgart company has no protective anchor shareholder. Because Daimler’s share price has been falling for years, many investors see the final argument in the dividend as to why they are still involved in the Swabians.

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Suspending the previously announced profit sharing in such a constellation should scare away large dividend funds, it is said in financial circles. The result: Daimler’s stock market value could drop even further and the group could finally become the takeover target.

More: How well are German companies prepared for the crisis?


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