Chapter 145 GATT Adjudication
In the immediate aftermath of Wolfgang's victory, Karim and Wolfgang privately signed an agreement under which Wolfgang would transfer all Volkswagen shares in the Porsche family to Karim in exchange for equivalent Porsche shares if the Federal German government repealed the Volkswagen Protection Act. With this agreement, Karim's acquisition of Volkswagen has finally taken a solid step.
So far, including Wolfgang's shares in Volkswagen, Karim and Tonya have eaten a quarter of Volkswagen's shares. However, due to the previous Volkswagen Protection Act, the acquisition could not be continued. And Karim and Tonya can't announce their concerted action relationship to the public. Just a few days ago, the Frankfurt Securities and Futures Commission had issued a warning letter to Eva and Karim under the Volkswagen Protection Act, warning them that they would face legal sanctions if they made further purchases of Volkswagen shares, and the Lower Saxony government was also negotiating cooperation with German financial institutions to dilute Eva and Karim's shares by issuing additional shares.
This serious lack of fairness naturally causes displeasure in the United States, the country where Bank Colombia is registered, and Switzerland, where MSC is registered. Just a week after the Frankfurt Securities and Futures Commission's warning, a US federal court ruled that Volkswagen and the Federal Government of Germany constituted unfair competition, and in retaliation, the US would ban Volkswagen products from continuing to be sold in the United States. This time, the U.S. trade department once again came up with an embargo comparable to the power of nuclear weapons, and the U.S. market decided to close the door to the Germans and let them reflect on it.
As soon as the news came out, Volkswagen's shares on the Frankfurt stock market began to plummet on the same day. Germany's trade department immediately applied to GATT for trade arbitration, and GATT had just received complaints from the United States, Switzerland and other countries that the German government had set up trade barriers to prevent foreign investors from doing business. Driven by these two news items, the mainstream media in various countries have paid attention to the trade dispute between the United States and Germany.
Within a week of the embargo, a large number of Volkswagen products that had been shipped to U.S. ports began to be evicted by U.S. customs, and U.S. agents began to cancel orders. Truckloads of Volkswagen cars were reloaded and sent back to Germany, and the sight of Volkswagen's board of directors began to bleed.
How to digest so much extra inventory all of a sudden. The European market must not be able to consume this batch of cars, what about Asia, it's a pity! Japan is also a big and powerful country in the automobile manufacturing industry. So the importance of the U.S. market is self-evident.
Volkswagen's board of directors soon began to put pressure on the German government, and Chancellor Kohl met with representatives of Volkswagen's management and listened carefully to their views. However, he tactfully told these people that according to the relevant rules of GATT, Volkswagen's demands are likely not to be supported. If the GATT does make such a decision, there is nothing the Federal Government can do.
"Can't we unite the European countries to sanction the United States in turn?" The proud German businessman said angrily, but as soon as he said this, he almost amused Chancellor Kohl.
"United European countries to sanction the United States, we were almost sanctioned by the whole of Europe at the EC meeting. I want you to think about it objectively, do you really think that the Volkswagen Company Protection Act can protect Volkswagen? Now the Americans are close to telling you the answer. Are you still naïve enough to think that Europe will be on our side? Gentlemen, I have to admit that Volkswagen's cars are indeed very competitive, but the competition is not limited to the product itself, and if you don't give up your illusions, you don't want to get the same fair treatment in the markets of other countries. After Chancellor Kohl said this, he left alone, leaving only the representatives of Volkswagen sitting in the room looking at each other.
As the largest single shareholder of Volkswagen, the Lower Saxony government was soon reaped by the drop in its share price. At the state legislature, the opposition launched a no-confidence motion against the incumbent state government, accusing the state government of being overly biased in favor of Volkswagen, which caused Volkswagen's share price to suffer a heavy loss, and the state government wasted a huge amount of money in the early process of increasing its holdings.
"That's not how taxpayer money is wasted, and if it had been spent on health care, education, and the environment, instead of helping Volkswagen snipe at foreign investors, we wouldn't have lost so much of our finances!" Some state legislators were harshly criticized.
"We may think that the Americans' sanctions are only temporary, but we ignore the Americans' demand that we end the Volkswagen Protection Act. Only by agreeing to the request of the American side can Volkswagen be able to regain its presence in the American market! And what our state is doing, they're still adding to Volkswagen's stock, and we're going to have to suffer losses from falling stocks before things turn around. The media have also questioned the policy of the Saxony state government.
Soon, in the face of public opposition, the Saxony state government had to abandon its plans to increase its share in Volkswagen. However, the termination of the Volkswagen Corporate Protection Act is still not in the discussion.
According to the rules of the Frankfurt market, Volkswagen Group released its second-quarter financial report on schedule, according to which Volkswagen will suffer a massive loss of billions of dollars in the second quarter, mainly due to the restrictions of the ban on sales in the U.S. market.
After the earnings report, Volkswagen was downgraded by major products and institutions, which had a further impact on Volkswagen's financing. At this moment, a piece of news pushed the public in the direction of the abyss. According to the GATT's final ruling, the Federal Republic of Germany's Volkswagen Protection Act was found to have violated GATT's provisions on free trade, and the GATT ruled that the German government had violated trade rules. This means that any GATT contracting state can ban Volkswagen from sale in its country on the same grounds. In this way, the last straw for Volkswagen is gone.
Since the Volkswagen Protection Act was enacted by the Saxony state government, Karim and Tonya also hired lawyers to file a lawsuit with the Federal Court of Justice of the Federal Republic of Germany after the GATT ruling, alleging that the Saxony government discriminated against foreign investors. At this point, the Volkswagen Protection Act became precarious. Because of the drag of Volkswagen, Germany's domestic auto parts manufacturers have also suffered heavy losses, and the Volkswagen Protection Act, which was originally used to protect their own interests, has changed from a talisman for the German automobile industry to a life-threatening talisman.