VW Said to Discuss Buying Insolvent Carmaker Karmann

Oct. 27 (Bloomberg) -- Volkswagen AG, Europe’s biggest automaker, is discussing a proposed takeover of insolvent car manufacturer Wilhelm Karmann GmbH at an executive board meeting today, two people familiar with the situation said.

A transaction would have to be approved by Volkswagen’s supervisory board, which meets Nov. 11, said the people, who declined to be identified because the negotiations are confidential. VW, whose executive board is meeting today at its headquarters in Wolfsburg, Germany, may pay 50 million euros ($74 million) to 75 million euros, one of the people said.

Karmann, based in Osnabrueck in the state of Lower Saxony, employs 1,600 workers in Germany and about half of them will be fired on Nov. 1 as insolvency dealings proceed, the people said. The manufacturer makes roof systems for some models from Daimler AG’s Mercedes-Benz unit and Bayerische Motoren Werke AG.

“There’s not much economic reasoning from Volkswagen’s perspective,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen. VW may have wanted to rescue Karmann to return a favor to Lower Saxony, which as VW’s second-largest shareholder prevented a takeover of the carmaker by Porsche SE this year, he said.

Lower Saxony Premier Christian Wulff, who sits on VW’s supervisory board, thwarted former Porsche Chief Executive Officer Wendelin Wiedeking’s plan to topple power structures at VW by upholding the so-called Volkswagen law which gives the state and workers a blocking minority.

Lower Saxony

Karman’s hometown Osnabrueck, about 170 kilometers (106 miles) west of Volkswagen’s Wolfsburg headquarters, is Wulff’s constituency. Local elections in Lower Saxony are scheduled to take place in 2011.

Christoph Adomat, a Volkswagen spokesman, and Karmann’s Christian Eick declined to comment when reached by Bloomberg.

Karmann traces its origins to 1901. Its best-known model was the Karmann Ghia sports car, built on a VW Beetle chassis from 1955 to 1974. Other orders included building convertible versions of the Mercedes-Benz CLK model and the A4 sedan made by Volkswagen’s Audi luxury division. Revenue last year dropped 16 percent to 1.3 billion euros from 2007.

Karmann, which filed for bankruptcy protection in April, employs another 1,150 workers at units in the U.S., Japan, Mexico, Portugal and Poland. Those divisions aren’t part of the insolvency proceedings.

The bankruptcy filing also includes the Automotive Global Service GmbH, Karmann-Engineering-Services GmbH, Karmann-Rheine GmbH & Co. KG and Karmann Rheine-Verwaltungs GmbH divisions. Ottmar Hermann, a Frankfurt-based lawyer, is acting as insolvency administrator and has estimated that liquidity at Karmann could last until Nov. 11, the day VW’s board is due to discuss a possible takeover, one of the people said.