VW puts Indian plant on hold amid bribes scandal

4th July 2005, Comments 0 comments

4 July 2005, BERLIN - The bribery scandal engulfing giant German carmaker Volkswagen AG has resulted in the group's chief, Bernd Pischetsrieder putting on hold a decision on the planned construction of a new factory in India, Germany's business daily Handelsblatt reported Monday.

4 July 2005

BERLIN - The bribery scandal engulfing giant German carmaker Volkswagen AG has resulted in the group's chief, Bernd Pischetsrieder putting on hold a decision on the planned construction of a new factory in India, Germany's business daily Handelsblatt reported Monday.

Publication of the report came as Volkswagen announced that it was to hand over documents about the scandal to the state public prosecutor's office in the city of Braunschweig, near the carmaker's head office in Wolfsburg in northern Germany.

At the same time, Berlin's daily Tagesspiegel reported that VW's plans to build an assembly plant in Angola had also been put on ice as the company mounted an internal investigation into the bribery and kickback allegations. VW declined to comment on the reports.

The burgeoning bribery scandal, which centres on VW's Czech-based Skoda operations, has badly shaken the company and has already triggered two high-profile resignations from the company.

Skoda's personal chief, Helmuth Schuster, left the company in June amid allegations that he took bribes from potential suppliers and that camouflage companies were used to secure lucrative VW contracts abroad, notably in India and Angola.

Last week, the company was rocked again when the head of VW powerful works' council, Klaus Volkert announced that he was also stepping down.

In a bid to shore up VW's image in the face of the allegations, group chief Bernd Pischetsrieder said last week he planned to make a comprehensive statement about the bribery claims.

While Germany's weekly Wirtschaftswoche said Volkert's departure was only the tip of the iceberg, the former works' council chief hit back, denying any wrong doing.

German weekend news report also referred to airline tickets of a Brazilian, who it is claimed had a personal relationship to Volkert, being charged to VW.

Since then, VW said it was hiring an external auditor, KPMG, to examine the company's records in order to investigate the Skoda allegations with the auditors beginning their work on Monday.

Coming as the group struggles to implement a tough cost-cutting plan and to head off a sales slump in both China and the United States, VW has also been forced to deny reports that the scandal might force the group's personnel director, Peter Hartz, to stand down.

A close friend of Chancellor Gerhard Schroeder, Hartz was the architect of the labour market and welfare reforms introduced by Germany's Social Democrat-led government in recent years.

Hartz is also considered to be a close confidant of both Schuster and Volkert. But a VW spokesman insisted last week: "Peter Hartz is and will remain personnel chief at VW."

VW, which is also Europe's biggest carmaker, slumped into the red last year and reported an operating loss of EUR 53 million in the first quarter of 2005.

DPA

Subject: German news

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