VW may have violated US law in its battle with suppliers

Ronny Hartmann, AFP via Getty Images

There are not many documents in the VW group about the secret operation “Project 1”. The fear was too great that confidential information would reach the enemy, the Bosnian supplier Prevent. According to secretly taped meetings, sensitive documents were apparently kept in the chairman’s vault, including the early instruction to get Prevent out of the way.

“There is only one decision in the safe, it does not officially exist,” said the head of “Project 1” in an internal round at the beginning of 2018. “They don’t want to hold onto anything on the board. But I said, ‘People’ I have to have something to do with it. The paper was signed by all the board members and went into the safe. I thought about myself a bit. “

VW does not want to comment on this secretly recorded meeting of “Project 1”. “Please understand that we do not publicly comment on internal procedures that affect confidential information and processes,” said a spokesman on request. For more than a year, the project group worked in secret on the so-called “control” of Prevent. A mission that often raised the question of how far the corporation can go to get rid of an unpleasant business partner. One thing was certain: the world’s largest automaker should never again be so helpless. Prevent should never again be able to paralyze production for days with delivery stops.

As can be seen from the sound recordings, VW tried to isolate the Bosnians in the car market, to systematically localize and prevent cooperation or takeovers from other suppliers. Exactly 217 names of suppliers can be found on a confidential list of “Project 1”. From VW’s point of view, these companies were threatened by Prevent’s influence. “We have accordingly integrated the suppliers who could potentially be considered for a takeover and identified them with a corresponding threat potential,” explains a manager according to VW-Tapes.

The Wolfsburg-based company divided the 217 suppliers into three categories: Group A were the suppliers who were most likely to be threatened by a takeover. There were exactly 44 companies from which Volkswagen either obtained a so-called “information obligation” – if Prevent should knock – or wanted to secure the right of first refusal.

One of the companies on the list was Inter Groclin. For many years, the Polish company exclusively supplied the covers for the VW Arteon and T5 (bus) models. “A sewing shop with a turnover of 50 million euros was allowed to deliver the seat covers for the T5 and commercial vehicles, that was like winning the lottery for us,” says a high-ranking employee of the company. But when VW learned that Prevent wanted to buy into the company and even take it over, the alarm bells rang in Wolfsburg.

3.5 million euros for a right of first refusal

The Poles had to reserve enormous production capacities for the Arteon, keep prices low and send the products permanently to Wolfsburg for quality control. So the dream deal turned into a losing business and Groclin ran into financial difficulties in 2017. To prevent a takeover by Prevent, VW offered financial support. “He (the managing director of Inter Groclin, editor’s note) has a problem with his 2016 annual financial statements,” explains the head of “Project 1” in a confidential meeting in March 2017. “His whole company is on it. If he doesn’t get the 2 million, then his whole business model goes flat. We actually have the guy in the corner. He also promised us that he would sign it. (..) We have to use this corner now. “

Volkswagen offered a total of 3.5 million euros in aid – but demanded a right of first refusal in return. According to VW-Tapes, today’s VW brand director Ralf Brandstätter signed a corresponding internal agreement. The paper was controversial. “If this is now signed by Mr. Brandstätter and (…), do we want to seriously write in” Blockade of a sale to Prevent “?” Asks a lawyer in the group. A little later he adds: “If this is unproblematic from a legal point of view, then I won’t say anything more”.

Some of the participants in the group receive the warning. “It is already correct. It’s very tough. This is an internal document. We have already discussed that it will also remain internal. We have to think about what happens when what it says is made public. I don’t know if the final version could not be taken out, ”says one manager.

Upon request, a VW spokesman explains that, due to the bad experience with Prevent, it was a “corporate responsibility” to “review the supply relationship with Prevent and its subsidiaries (…) in particular and to take suitable measures to ensure the security of supply with important components to guarantee”. Various courts have confirmed that the Prevent Group has repeatedly behaved illegally and extortionately against the Volkswagen Group and the brands concerned over the years.

Groclin eventually took the money from Wolfsburg and turned down Prevent’s offer. A year later, however, the collaboration between VW and Groclin ended. Sales slipped from 35 to eight million euros. Now it’s just about breaking up the company. Inter Groclin left a catalog of questions from unanswered.

In the USA in particular, the agreements with suppliers could have consequences. Because VW allegedly ruined Prevent’s business in America, the Bosnians are suing for damages. Agreements between car manufacturers and large direct suppliers are strictly regulated in the USA. The recorded conversations in “Project 1” about the so-called Tier 1 supplier Adient are all the more remarkable. “We are negotiating with Adient,” said a manager in early 2017 according to the VW tapes. “I even received a letter last Friday, a suggested wording.”

In order to get rid of Prevent but not endanger production, VW distributed the Bosnians’ delivery scope to other companies at an early stage – in the background. “Adient” should include take over the order for seat covers. Explosive: Adient not only replaced Prevent at VW, the supplier also ended the longstanding cooperation with the Bosnian group of companies. In Prevent’s view, this was part of the agreement between VW and Adient and was illegal.

When asked, Adient does not want to comment on the matter. A VW spokesman says: “Volkswagen AG adheres to legal and internal requirements. Our lawful behavior includes established and partnership-based processes in supplier relationships as well as observing the company’s relevant compliance guidelines. The responsible employees are subject to clear instructions and the respective managers are responsible for compliance with them. Against the background of the ongoing proceedings in Germany and the USA, we will not comment further. “


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