Volkswagen is experiencing the “biggest wiretapping scandal in German economic history” and hardly anyone gets it. For months, the meetings of an internal special unit for dealing with the unpopular supplier Prevent were intercepted by a manager. The case has what it takes to be a crime thriller: the mole has been unmasked, put in front of the door and is now probably dead. To a charred corpse come a burnt house and all sorts of internals from the category “How to serve a business partner?”. Ex- and auto-chancellor Schroeder also plays a role. Which, he keeps to himself.
In 2019, the US consulting firm Environmental Health Analytics (LLC) attempted to determine how many people die due to the excessive emissions of particulate matter, nitrogen oxides and nitrogen dioxide.* Result: Every year, there are 107,000 premature deaths worldwide only in connection with diesel exhaust gases. 38,000 victims would be affected on a global scale every year, 11,400 of them in Europe, simply because of non-compliance. The resilience of such data remains to be seen, and it remains unclear how much Volkswagen’s contribution to the loss of human life is. But there is no doubt that the Wolfsburgs have a lot of guilt.
In the meantime, a death has been added to the critical events in the VW “Dunstkreis”.* Whether this is the account of the German global corporation is far from clear and should not be asserted here. Nevertheless, the matter is highly explosive and could still be very uncomfortable for the Volkswagen executives. After the costly and image-devastating diesel scandal, the case highlights another feature of the VW system: the rigorous treatment of its suppliers.
Allegedly dead spy
What happened? On 10 August, the completely charred body of a man was found in a burnt-out car in a wooded area near Rottorf in the district of Helmstedt. Two days later, the Wolfsburg News first reported that the dead man would be the central figure in the “VW wiretapping affair”, the Volkswagen manager who allegedly recorded internal strategy meetings on how to deal with the reneplative supplier group Prevent by tape for more than a year.
It was not until 14 days after the discovery that the Braunschweig Prosecutor’s Office announced that the dead man was the vehicle owner, according to DNA analysis. However, prosecutor Julia Meyer did not want to confirm conclusively on Thursday, when asked by the post-think-tank, that the person is also identical to the spy in the VW espionage case. Correctly, therefore, one must continue to speak of the allegedly dead mole. The cause of death has also not been definitively determined, with much indicating suicide. Ten days earlier, it had been said that “no evidence of external culpability by external use of force” could have been found.
The public prosecutor’s office itself has been dealing with the case for about three weeks. A few days earlier, VW had filed criminal charges against the employee who had been unmasked at the end of July and immediately released. A short time later, the press reported that an arson attack had already been carried out on the victim’s house in a village in Lower Saxony at the end of May. The building was completely destroyed and no people were harmed. A link between the incident and the secret recordings is being investigated, investigators said. There is also a suspicion of attempted insurance fraud. Here, too, the last certainty is missing that the homeowner is really the caught spy. Prosecutor Meyer simply said that “the owner corresponds to the owner of the vehicle”.
“On the Verge of Illegality”
The so-called VW tapes were made public a month ago by the online magazine “Business Insider”, which belongs to the Axel Springer Holding. According to the research, a senior employee systematically recorded the discussion content of 35 meetings of the special unit “Project 1” in 2017 and 2018. The task force had been set up with the blessing of the VW Group Executive Board to find ways to “control” the Bosnian Prevent Group after more than forty years of cooperation. The recordings of almost 50 hours documented “impressively” by which means the car manufacturer “often wanted to serve off an unpopular business partner on the verge of illegality”, the Magazine wrote at the end of July.
Volkswagen had been in the clinch with the Bosnian Prevent group of the owner Nijaz Hastor for some time. The cooperation, which had been going quite smoothly for decades, has apparently been increasingly difficult since 2010 due to the strong price pressure of the Wolfsburgs and orders that have been cancelled without notice. While other suppliers joined the diktat, the Bosnians set their backs on confrontation, culminating in a supply freeze in 2016: When two Prevent subsidiaries stopped supplying transmission housings and seat covers, VW had to suspend production of Golf and Passat models for days, send thousands of workers on short-time work and suffer millions in losses. VW then stretched its arms, but at the same time pushed forward plans to throw out Prevent once and for all, which eventually took place in 2018 with the termination of all contracts.
Those who are strong can defend themselves
Of course, Volkswagen suspects that Prevent is behind the eavesdropping attack and wants the case investigated in court. Probably also because the compromising contents of the tapes are already out anyway, the bosses rely on the tactic forward defense and present themselves as victims of sinister machinations. In doing so, they play into the cards that so far all disputes about threatened and delivery stops have been decided in their favour. Even after the “fall of sin” in 2016, it imposed a penalty on the Bosnians. A company spokesman told Business Insider: “A court has made it clear that a Prevent company acted ‘with the means of blackmail’, while other courts have frozen a high double-digit million amount in favour of Volkswagen AG in the light of Prevent’s conduct.”
This is not about glorifying Prevent as a lamb of innocence. According to Deutscher Welle (DW), the group is considered in their homeland as “prototype of a player from the phase of aggressive capitalism after the end of the Balkan war”. The company has a reputation as an “anti-social employer with incompetent management, which regularly led to strikes and lawsuits”. On the other hand, there is no doubt about the economic success of the company, as it employs “more than 10,000” people worldwide, 7,500 of them in Bosnia alone. From the point of view of vehicle manufacturers, economic strength naturally also has a downside: Prevent can defend itself and has proven this repeatedly.
Prevent then returns the accusation of “blackmail” directly to the sender and wants to consider legal action against the car company itself. “According to the media reports, there are violations of antitrust law, possible stock insider transactions, false statements to authorities and courts, and unacceptable dealings with many suppliers,” a company spokesperson was quoted as saying. “This should be put to the attention of the competent authorities.” To this day, there is speculation as to whether there was in fact a price war behind the conflict. Due to the immense costs of the diesel scandal, Volkswagen had to tighten its cut in 2016 at the already low-yield core brand VW.
Was the hard line with Prevent and the ejection perhaps just a maneuver to gain even more legroom overall in dealing with the suppliers? In any case, the Bosnians represent this and speak of ‘criminal behaviour’. Volkswagen was apparently obsessed with the idea of “destroying Prevent and its subsidiaries at all costs,” the spokesman lamented. VW had ruthlessly used its “extreme market power” to set a “public example”. In principle, the Volkswagen system is not interested in a partnership and leaves “every supplier so much air to breathe that it does not fail and becomes as dependent as possible”.
According to Business Insider, the 2016 delivery was the birth of Project 1, whose meetings between January 2017 and February 2018 were recorded by the senior employee who is now (probably) dead. What he has captured on tape carries plenty of explosive power. For example, the records are intended to provide clues as to how VW’s 2018 takeover battle for Bavarian supplier Grammer led to Chinese company Ningbo Jifeng making the run. Not only was its third-largest customer at the time VW. The deal also left the Prevent group on the back of the pile, which itself held 19 percent of Grammer’s share of the deal and was looking for the big deal.
Starvation of medium-sized enterprises
In order to boot out the Bosnians, there are also said to have been “concrete considerations” that VW, Daimler and BMW buy together from Grammer in order to fend off the reneder suppliers. Although such statements are alleged to have been confirmed by tape recording, VW, at the request of Business Insider, denied concerted actions by the three largest German car manufacturers. The grammer issue also allows conclusions to be drawn about the relationship with other suppliers. A manager is quoted as saying: “If we let certain medium-sized enterprises starve, and we say that we do not agree at first, that could be exactly where the ownership structure says: Ey, you can do me. I am now selling this to the Prevent.” A colleague then asks: “Where do we have suppliers that are heavily attached to the price of steel, are relatively small at the moment and we are starving?”
As the magazine pointed out in another article, the audio tapes also document negotiations between Volkswagen and Prevent managers at the time. A meeting took place on 11 April 2017. In doing so, the VW employees stated that they would continue the cooperation until 2024 and possibly beyond. Other records, on the other hand, show that it was long before it was clear that the Bosnians would be put in front of the door. After the Prevent employee had left the room after that meeting, a VW man said, “He didn’t write anything,” if there were problems later, you would have been “three” and he was “alone”.
At a meeting in March 2017, a manager said: “I don’t know how to assess this legally when asked if we’re going to get prevent. What are we to say then: No? I would not like to address this at all.” One will say to adhere to concluded agreements and to regularly check the basis of the business relations, recommended a company spokeswoman present. The doubter was not convinced by this: “Can we leave this legally if we already know that we want to terminate agreements made?” Faced with these passages, the VW press office decided that the decisive factor was not the thought games of the project group, but the measures implemented.
Ex-Chancellor “turn on”
As the tapes also show, VW has long suspected that it was the target of espionage. “We are glass,” one knows that “the Prevent group knows everything we do,” it could be that “something is stuck under the table here,” one manager said. As early as the beginning of 2018, there are said to have been concrete indications of a spy. The tip came from Prevent. In numerous letters to supervisory boards and boards of directors, the Bosnians had informed Volkswagen that they had received secret documents. The letters also went to works council chief Bernd Osterloh and Lower Saxony’s SPD Prime Minister Stephan Weil, who sits on the supervisory board as a major shareholder for the state.
These events at least cast doubt on the fact that Prevent acted as a client and may have eliminated its V-man. On the other hand, an earlier “overview” of the VW management might suggest that the caught man has been under pressure for much longer. But all this is speculation and it remains to be seen whether and what the prosecution will shed light on findings. The accused himself had denied having evaded his employer during questioning. The recordings were merely used to produce minutes of interviews.
Finally, a strange thing: although it was very spectacular and acted as the “biggest wiretapping scandal in German economic history”, the mass media report rather subduedly on the case. In particular, hardly any editorial staff has used the extensive material published by Business Insider, which reveals much more illuminating. The name of former Chancellor Gerhard Schroeder can be heard repeatedly on the tapes. He said he had “turned himself in” to let his relationships play for VW. One manager suggested that he use his closeness to President Vladimir Putin to turn off The Money Tap in Russia. When asked by Business Insider, Schroeder said “nothing at all”.