Dusseldorf, Beijing, Berlin Volkswagen’s China boss Ralf Brandstätter has visited the group’s controversial plant in Urumchi. The city is located in the western Chinese province of Xinjiang, where international reports say the communist regime is brutally cracking down on the local Muslim Uyghur ethnic group. The work is therefore considered a ticking reputation bomb for the second largest car manufacturer in the world.
What is striking, however, is that Brandstätter attests to the factory after his on-site visit: “Modern premises, well-kept, high standard” – just as one is used to from VW, the manager explained to journalists. There is a halal canteen for the Muslim minority and a gym that the workforce wanted.
The employees could also gain further qualifications in other Chinese plants, says Brandstätter. Almost 200 employees have made use of it since 2015. “The working conditions are comparable to other locations in China,” he said. He therefore does not see any contradictions to what has been reported to him internally about the plant in Xinjiang.
Thomas Steg, VW’s general representative for external relations, also emphasized in a call to journalists on the subject: “In the past we had and currently have no evidence of human rights violations or forced labor at the Urumchi plant.”
The location has a high symbolic importance for Volkswagen in China, its most important individual market. At the same time, the reputational risk is growing. Employee representatives have been critically questioning the commitment for some time. And skepticism is also growing on the part of investors.
A few gray buildings surrounded by fences.
According to Brandstätter, he was in Urumchi for a day and a half in mid-February. The talks were good, emphasizes the manager, who claims to have spoken to the on-site workforce and to seven employees from different ethnic groups. According to VW, 238 employees are currently employed there. Almost a third belong to minorities, around 17 percent of all employees are Uyghurs.
The information cannot be verified. VW rejected a request from the Handelsblatt in advance to be able to be part of the trip.
Reports of human rights violations and forced labor keep coming out in Xinjiang. The then UN Human Rights Commissioner Michelle Bachelet accused China of “serious human rights violations” against the Uyghur minority shortly before her term of office ended. A report mentions possible “crimes against humanity”.
There are similar reports in the so-called “Xinjiang Police Files” and in the report of the Australian think tank ASPI. The latter assumes that there is a re-education camp just 15 minutes’ drive from the VW plant, in which members of the Muslim minority are interned by the Chinese state.
VW boss Blume on presence in Xingjiang: “Positive for the people”
Volkswagen has been asserting for years that everything in the plant is done according to the rules and that human rights are respected. One is concerned about the numerous reports, which the Chinese partners would also know. Nevertheless, the group is sticking to its local presence. This is sometimes even “positive for people”, as CEO Oliver Blume recently wrote to the World Uyghur Congress (WUC).
“No evidence of human rights violations.”
(Photo: dpa)
VW itself only has a limited right of access in Urumqi. Formally, the German group is neither the sole owner nor the operator of the factory. The plant is divided into a joint venture between VW and the Chinese partner SAIC, each with 50 percent. The operator is a subsidiary of the joint venture.
>> Also read: Volkswagen boss Blume on a difficult mission in China
In order to keep an eye on working conditions, whistleblower systems and a code of conduct have been set up. Experts consider such systems to be waste. In a police state like Xinjiang, anyone who expresses even the slightest criticism of the Chinese leadership or state institutions can be locked up in forced labor camps for years.
The problem: Without the consent of the Chinese partner SAIC, VW cannot make any changes to the construct. The contracts are respected, says VW foreign affairs boss Steg. “From a global company that wants to conclude contracts worldwide, you expect contract loyalty and reliability.”
Consequently, the plant could not simply be closed, even if the carmaker wanted it. According to information from the Handelsblatt, the contract between SAIC and VW will run until the early 2030s. Until then, the group is in a dilemma: either it annoys the Chinese side, or it sticks to the controversial work – even if this is accompanied by unpleasant questions.
Employees on the supervisory board demand information on the controversial work
They are also becoming increasingly open and critical internally. The employee side on the supervisory board suggested “that the group explain the specific benefits of the Urumchi plant to the media and other stakeholders more than before,” the group works council said on request.
The plant may not be in the direct control area of VW AG in purely formal terms and with a view to the “group structure,” the statement continues. However, that does not release VW from “confronting and actively positioning itself” about issues such as human rights violations in the region.
In the summer, IG Metall boss Jörg Hofmann openly questioned the investments in the plant and asked VW to withdraw from Xinjiang. Hofmann is deputy chairman of the group’s supervisory board.
In the corona crisis, VW sales in China also suffered. In decent years, however, the car company sold more than four million cars there. The economic contribution of the plant in Urumchi, on the other hand, is small.
Cars that are largely finished now only come to Xinjiang for a final check. 10,000 vehicles were recently put into operation in the controversial factory and delivered to local dealers. The capacity used to be 50,000 – the number of employees has also more than halved since the Covid crisis. The employees have either been accommodated at other locations or have received severance packages, says VW.
The situation now also poses a risk with regard to the capital market. In November, the US financial services provider MSCI issued a warning in its sustainability rating for VW because of its activities in Xinjiang. Some funds then threw the stock out of their portfolios.
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The warning has a high level of escalation, says Ingo Speich, head of sustainability at Deka Investment. This could also have an immediate impact on bond and equity positions. “The human rights situation at VW in China is a black box for the capital market. In Xinjiang, VW is caught in its own reputational risk.”
The Uyghur diaspora explained that VW had kept information about Brandstätter’s trip covered. “So far there are no signs of a turning point at Volkswagen,” says Haiyuer Kuerban, head of the Berlin WUC office. It was the first visit by a VW China boss since 2018. After all, Brandstätter announced: “It was my first visit, but not my last.”
More: IG Metall calls for VW to withdraw from the Xinjiang Uighur region
First publication: 02/28/2023, 06:00 a.m. Updated 2/28/2023 at 1:38 p.m.