The Telegraph
Since 1st March, 1999
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Scandal slams brakes on VW plan

Frankfurt, July 4: Volkswagen’s (VW) plan to build a plant in India appears to have been caught in a payoff snarl.

Chairman Bernd Pischetsrieder has postponed a decision on the planned construction till bribes-for-deal allegations are out of the way, German business daily Handelsblatt reported today, quoting sources close to suppliers.

In the line of fire is Helmuth Schuster, the personnel chief at VW’s Czech arm Skoda who is accused of taking bribes from potential suppliers and using camouflage companies to secure lucrative contracts abroad, notably India and Angola. Schuster quit last month in the thick of charges.

The row threatens to jolt Europe’s biggest car-maker just as it is beginning to steer itself out of a prolonged slump.

Berlin daily Tagesspiegel said the planned construction of the Angola factory has also been halted in the wake of the scandal. VW declined comment on the information with the newspapers, though the firm is hiring independent auditors KPMG to review the situation.

The Wolfsburg-based company said it was also conducting its own internal investigation on Schuster, who left on June 15 after having steered Volkswagen’s Indian venture and managed human resources at Skoda.

According to German newsweekly Focus, Schuster was forced to leave amid allegations he had taken bribes from suppliers in relation to the Indian project. Insiders fear other executives are also likely to be implicated.

The scandal peaked last week when the long-serving head of VW’s general works council, Klaus Volkert, also announced he was stepping down nine months earlier than planned. Reports had linked him to the scandal, though Volkert had himself denied he had any role in the affair.

The head of one of Germany’s most powerful works councils, Volkert told workers he was resigning due to reasons of age.

Nevertheless, industry sources said that Volkert, 62, was leaving his post in connection with a bribery scandal at VW’s Skoda unit.

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