FRANKFURT -- U.S. asset manager Brandes Investment Partners LLC has increased its voting stake in Volkswagen to 10.65 percent, becoming the German carmaker's second-biggest investor, Volkswagen said on Monday.
No immediate comment was available from Brandes on the move, although private investors' rising prevalence among Volkswagen's top shareholders could step up pressure on management to cut costs and shore up profits.
In a disclosure statement, Europe's biggest carmaker said Brandes's stake held for clients had surpassed the 10 percent reporting threshold as of July 23 -- the day Volkswagen cut its earnings target for 2004.
Brandes, founded in 1974, specializes in picking stocks it thinks are trading below their true worth, the so-called value approach to investing. It had some $82.7 billion under management as of March 31, according to its Web site.
Volkswagen said in January that Brandes held a 6.15 percent stake.
Brandes's European arm referred questions on the matter to headquarters in California, where no one was immediately available.
Volkswagen shares have underperformed the DJ Stoxx European car index by more than one-quarter this year and are its worst-performing stock.
VW spokesman Frank Gaube said the company was happy to count Brandes as a major investor.
"From our side it is good that we see people having a positive view on the long-term prospects of Volkswagen," he said, adding the move would not affect the carmaker's talks on selling a big stake to the Gulf emirate of Abu Dhabi.
"We are still talking (to Abu Dhabi officials)," he said, adding that nothing had been finalized.
WEAK FIRST HALF
Volkswagen plans to sell Abu Dhabi a block of treasury stock that Gaube said represented around 9.8 percent of its shares and 13.6 percent of its voting rights.
The German state of Lower Saxony -- Volkswagen's home -- owns around 18.8 percent of the company's voting rights, making it the biggest investor. Should the sale to Abu Dhabi proceed, Brandes would slip to third-biggest investor by voting rights.
Gaube declined to comment on whether VW may face more pressure to boost returns to investors should two private-sector investors emerge as major shareholders.
Last month, Volkswagen slashed its 2004 profit target after weak first-half earnings and now aims for an operating profit of 1.9 billion euros ($2.29 billion) before special items.
VW is battling weak German car sales and severe problems in North America, where the impact of the strong euro, a price war in the United States and an ageing model range led to a first-half operating loss of 503 million euros, which it says could widen in the second half.
CSFB analyst Harald Hendrikse said Brandes seemed to believe that Volkswagen would be able to make progress with its ForMotion cost-savings program.
If so, the stock now looks "mega-cheap" given the way operating income gains translate to the bottom line, he added, calculating that each 100 million euros in operating improvements could add 20 or 25 cents to earnings per share.
"On a P/E (price-earnings ratio) basis, it looks expensive, but on an earnings momentum basis people actually could be very, very surprised suddenly, and that is why I think it is good value," he said.
VW trades at about 11.6 times estimated earnings for 2004, above volume carmakers like Renault and PSA Peugeot Citroen, but below German peer DaimlerChrysler, according to Reuters data.