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back to index backEUROtalk August,  2005

VW's scandal means that Piech's days could be numbered

Germany's institutions are coming under attack ahead of the country's Sept. 18 election to choose a new federal government. And the Volkswagen group is at the center of the storm.

German Chancellor Gerhard Schroeder was a member of VW's board in the 1990s when the so-called "cronyism" between politicians, trade unions and management began to take root. Many observers believe that this cronyism led to the current VW scandal.

In Germany, Schroeder is known as "the auto Chancellor" and his political opponents are taking full advantage of his former connection with VW. He is unlikely to keep his job after the election. But it is not just political opponents who see an opportunity to settle old scores.

The VW employees singled out for their reported role in the scandal are striking back. They have opened the secret files they have kept hidden for years because they feared retribution. Increasingly embarrassing revelations that expose corruption among VW executives and union leaders are being published in Germany's newspapers.

Piech's era

Schroeder's not the only who's job is on the line. His close friend Ferdinand Piech, chairman of VW's supervisory board and former VW CEO, increasingly is coming under fire.

The VW executives who are now being bashed in the media launched their careers during Piech's reign. The Wolfsburg Way, which is to court friends, intimidate opponents and make employee representatives compliant, came into being during Piech's era.

German newspapers are full of VW scandal stories every day. These stories allege that VW business trips turned into sex parties and that family members of prominent union officials were provided with new cars for practically nothing.

Schroeder's Social Democratic Party was given VW buses for campaigning during elections. Friends of the Social Democratic Party got lucrative jobs in such organizations as the VW Sound Foundation. The company paid former VW employees' salaries when the government already was paying them as full-time politicians.

Piech's 'hobbies'

The German press also has reported that works council members, politicians and even journalists were offered consulting contracts, free trips, hotels and women, financed from company coffers.

While all this was happening Piech pursued his "hobbies."

He bought and restored luxury brands such as Bugatti. At great expense he developed a Climatronic air conditioning system that offers direct and indirect ventilation and had it installed in a monster-sized, upper-premium sedan called the Phaeton.

Piech's family business, Porsche Holding Salzburg, also won contracts to import VW models into Hungary, Romania, Serbia and other growth markets in central and eastern Europe.

Bernd Pischetsrieder, who took over from Piech as VW CEO more than three years ago, has long held off on criticizing his predecessor. But Pischetsrieder is now setting about cleaning out the stables. He is getting help from Christian Wulff, premier of Lower Saxony, the German state where company headquarters is located. With a 13.7 percent stake, Lower Saxony is VW's largest shareholder and Wulff sits on the company's supervisory board.

Piech has responded to the scandal by disappearing from view.

He may already be counting how many days he has left in his job.

Source: German Automotive Industry Newsletter - GAI

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