Ausgabe 29/2005

Scandal at Volkswagen With Prostitutes and Shady Executives, There's No Love Left in this Bug

The sex, bribes and corruption scandal at Volkswagen is shaking the company to its core. But in a company whose largest shareholder is the German state of Lower Saxony, a number of politicians also have their fingers in this mess. Now, the affair is casting a shadow over federal elections.

By , Padma Rao and

VW Autostadt Wolfsburg: Volkswagen is see-sawing between major problems and frivolities

VW Autostadt Wolfsburg: Volkswagen is see-sawing between major problems and frivolities

Last Wednesday was Volkswagen day. By 8 a.m., the company's supervisory board was already meeting at company headquarters in Wolfsburg. For Peter Hartz, Germany's best-known and most controversial personnel director, it was his last -- and at times most embarrassing -- appearance at the Wolfsburg-based corporation.

In response to a joint request by VW's auditors, together with Supervisory Board Chairman Ferdinand Piëch, Jürgen Peters, the president of Germany's IG Metall trade union, top labor representative Bernd Osterloh and Christian Wulff, governor of the state of Lower Saxony, Hartz presented his life story, which has essentially consisted of three things: work, work, and more work.

On August 1 of this year it will be exactly 50 years ago to the day that he began his apprenticeship in a machine plant. The group quickly agreed that August 1 would also be the appropriate date for Hartz to leave the company. With his departure, he is also assuming responsibility for company scandals that had Volkswagen paying for lush pleasure trips and procuring prostitutes for its directors and executives.

At 2:00 p.m., Chief Financial Officer Hans Dieter Pötsch and Volkswagen brand group chairman Wolfgang Bernhard, speaking to analysts, summed up the group's current situation with one word: "bad." Volkswagen's plunge into the red is "dramatic," said Pötsch, and rapid improvement is unlikely to happen anytime soon. Worse yet, any spur in sales set off by the launch of its new Golf and Passat models has more or less fizzled.

Bernhard said VW has no plans to close any factories at this point, but added: "We are considering all options." And then the affair involving prostitutes and visits to brothels was taken to the next level of scandal when entertainment magazine Bunte published allegations by the wife of Helmuth Schuster, the former director of Volkswagen's Czech subsidiary, Skoda, who the company showed the door without any notice. His wife, "Ilona R.," alleges that Viagra and other aphrodisiacs were handed out to supervisory board members during their pleasure trips -- and VW was footing the tab for it.

For VW, it was a day of back-and-forth between major problems and minor frivolities, between the tabloids and madness, red lights of the bordello milieu and the blue lights of cop cars; corruption in the business world and storms on the political horizon that have already engulfed the governor's office in Lower Saxony and veteran members of the Social Democratic Party.

Hardly a stone has been left unturned, everything seems to have been turned upside-down, and in the ensuing giant cloud of dust, it's almost impossible to recognize how the various parts were ever connected in the first place.

An army of officials -- auditors, district attorneys, the state office of criminal investigation -- has now been charged with the monumental task of investigating VW's problems. Even Indian federal police officials are involved -- they're investigating Indian politicians charged with corruption.

And if that weren't enough, prostitutes, detectives and brothel owners are now offering their stories to the tabloids, usually for money. Of course, this doesn't exactly make it any easier to understand the three main stories in the VW saga.

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