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July 08, 2005

Another Volkswagen Scandal Article

Wall Street Journal features another article on the scandal at Volkswagen and the implications for Germany's industrial relations system.

VW Woes Go Beyond Scandal

While much of Germany is riveted by an investigation into bribery allegations at Volkswagen AG, a strategic shake-up is brewing behind the scenes at Europe's largest car maker in terms of sales. The bribery allegations threaten to become an issue in an expected vote this fall on whether to keep Gerhard Schröder as chancellor, but the strategic changes at VW could have longer-lasting consequences for the company -- and its worker.
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In trading Auburn Hills, Mich., for VW's home base in Wolfsburg, Germany, Mr. Bernhard is entering a much more difficult environment in which to joust with organized labor. Anger over Germany's unemployment rate -- 11.6% in May, a near-record in the post-World War II era -- is already fueling voter anger toward Mr. Schröder. Volkswagen's largest shareholder, the German state of Lower Saxony, also has an interest in preserving jobs. And in keeping with German law, about half of the seats on the company's board belong to worker representatives.
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"The big question is whether the company has the guts to cut capacity in Germany," said Stephen Cheetham, an analyst with Sanford C. Bernstein. "VW has an iconic status as the child of the economic miracle" of West Germany during the post-World War II era, added Mr. Cheetham. As a result, any decision to cut jobs at the company "has implications for the whole of Germany and German employment."

July 8, 2005 in Comparative Labor Relations, Volkswagen | Permalink

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