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Bugging scandal at VW: Secret meetings leaked at Volkswagen

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The head of “Project 1” seems perplexed at the meeting. The powerful Volkswagen group has just founded the secret special unit to get rid of an unpleasant business partner – the Bosnian Prevent Group, which supplies seat covers and gear parts. But many measures in the dispute have so far been lost, reports the high-ranking VW manager. Even better public relations would be hopeless. Only with the announcement that VW has now received prominent reinforcements does the cheerfulness return to the round.

“Mr. Gerhard Schröder has intervened,” announced the project manager. “Oh well,” says one participant. For or against VW is asked. The answer: The former chancellor and former VW supervisory board would work as a lobbyist with the best Kremlin contacts for the car manufacturer. The mood is getting better. A manager finally suggests that Schröder should use his proximity to Putin to turn Prevent off the money in Russia. A very delicate idea for a company in which the state of Lower Saxony holds a 20 percent stake.

Usually, such content from internal meetings should not be made public. Schröder says nothing at all on request. VW denies that he has been contacted or instructed in the matter. Only in this case is every word from the crisis round documented on an audio file: That Schröder is active, that he should let his relations with Russia play for VW. And it is just a small extract from one of the largest eavesdropping affairs in German economic history.

According to information from NewsABC.net, the confidential strategy sessions on the bitter conflict with Prevent were secretly recorded during 2017 and 2018 – a total of almost 50 hours. The VW tapes give an exclusive insight into how senior managers have switched off a supplier. The purpose apparently justified all means – approved by the highest authority. Because one name keeps coming up: Ralf Brandstätter, who became CEO of the VW brand a few weeks ago, regularly presented the results of the project group to his boss Herbert Diess.

Today's VW brand boss Ralf Brandstätter was entrusted with the Prevent case.

Today’s VW brand boss Ralf Brandstätter was entrusted with the Prevent case.

VW explains today: “The internal project team at that time had the task of averting further damage to the company, its customers, employees and suppliers. All possible approaches were discussed openly. The project team regularly prepared board templates for important decisions, since it was not a decision-making body itself. Of course, the team did not prepare a template for the management board for every thought. ”

How the recordings were made and used has not yet been clarified. On request, the Prevent group claims to have no knowledge of the tapes. It is doubtful whether VW believes. There are also numerous places in the VW tapes in which managers express the suspicion that Prevent would spy on the car manufacturer. At the time, however, this often only caused laughter from the other participants.

“When internal and confidential meetings are illegally documented and such information is released to the public without authorization, we are deeply shocked,” said a VW spokesman on request. “The case will of course be investigated.” According to reports, the search for a spy in their own ranks is already underway in Wolfsburg. Members of the project group are stunned in internal surveys. Allegedly there was strong cohesion in the special unit. “We did not believe that there was a traitor in this group,” said a VW employee who is familiar with the process. “The team had the common goal of freeing VW from Prevent.”

The Prevent Patriarch Nijaz Hastor in three parts and with a bow tie. Photo: Shutterstock

The Prevent Patriarch Nijaz Hastor in three parts and with a bow tie. Photo: Shutterstock

The Bosnian Hastor family is behind the auto parts supplier and VW enemy Prevent. Family patriarch Nijaz Hastor screwed VW models together in Sarajevo on behalf of Wolfsburg in the 1970s. He gradually developed the reputation of a reliable supplier for the VW management, built up a wide network of supplier companies and had a lot produced in the East. One can say that VW made the entrepreneur Hastor great. Both, Wolfsburg and Bosnian, worked together fairly smoothly for about forty years.

First, VW gave the secret force the name "elephant".
First VW gave the secret force the name “elephant”.

But at some point the increasing price pressure from VW put pressure on the relationship. While other suppliers complied, the Bosnians revolted and threatened to cease production. For Volkswagen, it was an outrageous process that was not without consequences. NewsABC.nets have internal VW documents that prove that Volkswagen already prepared an “Exit Strategy Prevent” on June 12, 2013. The auto supplier should be booted out. The project was entitled “Elephant”. According to this, VW calculated that the “leveling” of Prevent could be completed by 2020. Because of the long planning times in the automotive industry, suppliers cannot be replaced so quickly.

But in 2016, the dispute over prices escalated. Two Prevent subsidiaries (Car Trim and ES Automobilguss) then stopped delivering gearboxes and seat covers to VW, paralyzing the production of Golf and Passat models for days. VW had to send thousands of employees in short-time work, lost millions every day. In the emergency, the carmaker concluded an armistice with Prevent. For a moment it seemed as if a small supplier had brought the world’s largest automaker to its knees. But behind the scenes, VW is now pushing ahead with the plans to eject. It was the birth of “Project 1”. The special unit, whose secret meetings were listened to for more than a year.

Secret VW documents for "Project 1"
Secret VW documents for “Project 1”

The project group’s first major case was the takeover battle over the Bavarian supplier Grammer. Prevent bought 20 percent of the listed company, which among other things Headrests produced. The fear in Wolfsburg: With the systemically important supplier, the Bosnians could blackmail VW again. This shouldn’t come this far. An internal VW document available to NewsABC.net states that you have to get a friendly shareholder on board and contain Prevent’s influence through a capital increase.

The VW tapes also show that VW has coordinated its anti-prevention strategy with Daimler and BMW. Accordingly, there were concrete considerations that the manufacturers would buy from Grammer to ward off prevention. “This is currently the discussion between us, Daimler and BMW. And a financial investor who would do it for us. I already had a first draft of what it looks like yesterday, ”says a manager in the group. On request, however, VW claims that there was no coordinated action with other automakers.

VW is known for meticulously documenting processes. So also the own strategy in the Grammer case.

VW is known for meticulously documenting processes. So also the own strategy in the Grammer case.

Ultimately, the Chinese company Ningbo Jifeng bought from Grammer, whose third largest customer at the time was VW. “There will soon be a message that he is buying (Jifeng, editor’s note) through the stock exchange, quite normal,” said a VW manager during a listening session. So Jifeng was an ally of the Wolfsburgers. What is more, the Volkswagen managers were always aware of how the Chinese company was operating.

The Grammer case also reveals Volkswagen’s general dealings with suppliers. During a meeting, the VW managers worried that Prevent could buy from other suppliers and thus increase the pressure. Especially for those who treat VW badly. “If we now starve certain medium-sized companies there, and we say that we don’t agree at first, that could be exactly where the ownership structure says: Hey, you can do it with me. I’m going to sell this to the Prevent. Where do we have suppliers who are heavily dependent on the steel price, are currently relatively small and are starving? ”Asks a VW manager. The answer comes relatively quickly that 80 percent of small and medium-sized suppliers are affected.

The discussions in the special unit also focused on how to prevent Prevent from getting a stab at new orders. For the new Golf 8, the project team devised a plan for how they could exclude prevent from the tenders for the seat covers. A manager asked in a listening session: “How do we modify the bidder lists so that we do not specifically request Prevent?” The group found that this project was complicated. Prevent produce at dumping prices, which would make it the cheapest supplier and would push it far up the lists. In this case, you have to decide not to use the “best bid” principle, says another VW man. Taking Prevent off the list of bidders would be “very suspicious”. “It smells too much after consultation,” says a manager.

In fact, unlike the previous Golf 8 models, Prevent was no longer in use. Upon request, VW confirmed that the group had discussed how “to deal with new offers from preventive companies”. It is absolutely customary that in addition to the price, among other things, quality and especially delivery reliability are also included in the evaluation. “All offers from suppliers are measured against these common standards,” said the spokesman.

There are many such explosive statements on the VW tapes. The confidential group was obviously aware from the start of the danger that someone could listen in. In one of the first meetings, the project manager said: “We are transparent. We know that the Prevent Group knows everything we do. Even with topics where only a handful of people knew, they still know. Where from remains questionable. Please do not misunderstand, it may be something stuck under the table here. “

The Prevent collaboration was finally over after VW canceled all contracts with the group in March 2018. As a result, the two parties overwhelmed each other with countless lawsuits. It was not until the end of June that Volkswagen filed another lawsuit for damages for € 17 million for “price dictation”. In contrast, Prevent is suing the automaker in the United States for 750 million euros. The claim for damages has not yet been admitted.

“The judgments available so far speak a clear language that Prevent illegally stopped delivery in August 2016 or threatened to stop delivery in another case,” says a VW spokesman. “A court clearly formulated that a prevent company acted” with the means of extortion “, other courts have frozen a high double-digit million amount in favor of Volkswagen AG in view of the behavior of Prevent.”

Prevent, on the other hand, accuses the Volkswagen Group of “criminal behavior”. “In recent years, Volkswagen has obviously been obsessed with the idea of ​​destroying Prevent and its subsidiaries at all costs,” says a company spokesman. “Volkswagen has ruthlessly used its extreme market power to do this. Overall, we are convinced that Volkswagen wanted to give Prevent a public example of how to deal with independent suppliers. ”The Volkswagen system is fundamentally not interested in a partnership-based cooperation with its suppliers. “It gives every supplier so much air to breathe that they are not going bust and are becoming dependent on maximum,” said the Prevent spokesman.

For VW, the eavesdropping sessions are at most unpleasant. Especially since the group invests a lot of money and effort in the group security, so that does not happen. One or the other former secret service agent can be found on the payroll. The distrust does not stop at the own supervisory board. Here the members, including the Lower Saxony Prime Minister Stephan Weil, have to put their cell phones in a wooden chest. Such measures have long been considered sufficient. So far, the worst bugging scandal of the car giant has been limited to a baby monitor that was once discovered in the hotel room of the then Porsche boss Wendelin Wiedeking.

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