Tuesday, July 19, 2005

Skoda-Volkswagen Scandal (II) : Suggests Systematic Corruption

The endless litany of Skoda-Volkswagen linked scandal emerging daily in the media emanates from the deepest innards of "System Volkswagen" - an incestuously intertwined body representing the interests of employers, unions, suppliers and politicians - which steers the automotive group.

The scandal's head of steam first built up at VW's Czech subsidiary Skoda, but the juiciest details so far have come from sacked Volkswagen employee Klaus-Joachim Gebauer, who has supplied his lawyers, led by the FDP (centre-right) politician Wolfgang Kubicki, with over 60 pages' worth of ammunition to embarrass his erstwhile employers.

The resignation of Peter Hartz, close associate and adviser to Chancellor Schroeder, has been the highest proifle scalp so far. Hartz, in his role as adviser to the socialist SDP/Green government, was the champion of measures designed to address the chronic problems of German unemployment by putting more of a squeeze on the unemployed. "Hartz IV", one of his programmes, was implemented disastrously, resulting in a massive waste of tax money, organisational duplication and incompetence, and - as always with such plans - unnecessary human suffering. The imbecilic way in which "Hartz IV" was implemented stiffened the resistance of many amongst Germany's 5 million unemployed, and the people who fear to join them - against even reasonable reform of the sclerotic welfare state. Yesterday, the Prime Minister of Niederschden, Christian Wulff, and the boss of the IG metals union, Jürgen Peters, met to discuss whom should succeed Hartz. No name has yet emerged.

No-one, as far as the blog is aware, has yet asserted that senior politicians associated with Volkswagen - like Chancellor Schroeder, who as Prime Minister of Niedersachsen served on its board - were themselves party to the whoring and bribery that is alleged to have been an integral part of "System Volkswagen". But at the very least, the mere fact of their involvement throws aspects the system into further doubt. For whilst it is quite credible that the politicians knew nothing of the sordid goings-on, one might justifiably ask what, if they knew nothing, they were doing on the carmaker's board in the first place.

"System Volkwagen", in its close connection with high politics, has a long and unsavoury history. Everyone knows that Adolf Hitler himself gave the first impetus for the building of a "Volkswagen" - a car for the people. But even today, there is a dispute between the company and the designer who was never paid for the famous logo he designed - as he claims - at the direct behest of the Nazi government in 1939. If this is not a failure of justice or of ethics, it is certainly a failure of basic communications and PR for such a fundamental theme to remain unresolved.

Meanwhile, the prosecution of "System Volkswagen's" head of procurement, Francisco Garcia Sanz, is proceeding. A supplier alleges false financial details supplied by Sanz led to bankruptcy. Sanz, an integral player within "System Volkswagen" is also alleged to have held shares in various VW suppliers - a brazen conflict of interests which, it appears, was tolerated, if not actively encouraged, by the system.

And, as the blog reported before, it is precisely the smaller suppliers who may suffer most as light is thrown on the murkier aspects of "System Volkswagen". To take one example from the pool of communications agencies - companies like the relatively unproven cayenne communications agency, which have helped to build up their business on the back of Skoda-Volkswagen international contracts, are far likelier to suffer damage to their reputations than proven suppliers with established creative reputations, such as DDB or Fallon.

The failure of "System Volkswagen" is emblematic of the failure of corporatist Germany as a whole, and betrays shortcomings in the Rhineland Model, with its cosy interdependence of industry, politics, finance, unions and suppliers. At some point, excess cosiness seems to have become outright corruption.

Update 27th July 2005: VW Chief Pischetsrieder Sends Ex-Ambassador Elbe to "Pacify India".

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