Volkswagen conspicuously downplays its problem factory

The Volkswagen Group has significantly downsized its controversial plant in the Chinese Uyghur province of Xinjiang. There has been a "change in the business model," said VW China boss Ralf Brandstätter in Beijing. Instead of assembling vehicles as before, only the “final commissioning process” now takes place in the factory.

The number of employees has fallen from almost 700 to 240 people. According to Brandstätter, he was the first VW top manager in several years to visit the plant in the provincial capital of Ürümqi on February 16 and 17.

The plant in the far west of China has been under international criticism for years. Because in Xinjiang, the communist regime is brutally taking action against the Muslim Uyghur ethnic group, which is at home there.

Hundreds of thousands of Uyghurs have been detained in re-education camps and subjected to forced labor, according to human rights groups like Amnesty International. The Office of the UN High Commissioner for Human Rights also published a report in 2021 denouncing serious government violations against its own population.

Against this background, the plant is a burden for the VW Group. It was opened in 2012 when Beijing, as part of the "New Silk Road" initiative, took a closer look at the west of the country and promised economic growth there.

At that time, the relationship between Germany and China was different. "The project was highlighted very prominently at the end of April 2012 by a visit by the then Chancellor Angela Merkel and the Chinese Prime Minister Wen Jiabao to Wolfsburg," said Thomas Steg, VW's chief lobbyist.

"Expectations were high with a view to Ürümqi's development potential on the historic Silk Road."

But things changed in 2015. After a deadly attack by Uyghur jihadists, the leadership in Beijing passed anti-terror laws and embarked on the course of suppression against the population group that has continued to this day.

Since then, Xinjiang has been virtually inaccessible to human rights lawyers and journalists. And a problem for the VW Group.

Measured against the size of the group, the plant is economically meaningless. According to Brandstätter, 10,000 cars are to be delivered from there this year; the wagons arrive practically ready from other factories and are only prepared for trade.

"The number of employees is sufficient for this process, we are not planning any new hires," said the manager. Originally, the factory was designed for 50,000 cars per year.

Politically, the significance of the work is all the greater. "I too am very concerned about reports of human rights violations in the region," said Brandstätter. "But we have no evidence of human rights violations at the plant."

During his visit, he "found no contradictions" compared to the data and reports he had received so far. During the day and a half in Ürümqi, Brandstätter toured the entire plant, ate in the canteen and had one-to-one meetings with seven employees.

Unsurprisingly, these workers were content with their situation. All employees of the plant are permanent and have been with the company for at least four years, three quarters for eight to ten years.

Simultaneously with Brandstätter's visit to Xinjiang, human rights violations by the Chinese in the province were discussed at a meeting of a UN commission in Geneva. Before the Committee on Economic, Social and Cultural Rights at the High Commissioner for Human Rights, the Chinese representative defended his government's actions against the Uyghurs.

The "vocational training centers" in the Xinjiang region are not detention centers or places for forced labor, but schools that de-radicalize trainees. There, people would be "trained" who would have "participated in minor terrorist activities" that did not constitute criminal offenses. Independent observers see things very differently.

Despite the problems, it is clear to Volkswagen that they will not withdraw from the region. This is also due to the legal structure behind the factory. The plant is operated by a subsidiary of the joint venture company SAIC-Volkswagen. This, in turn, is one of the large joint ventures that carry VW's business in China; it is owned 50 percent by each of the partners involved.

The Chinese are in the lead. SAIC is a state-owned company from Shanghai that also builds and sells cars under its own brands - and thus competes with Volkswagen. It is politically important for SAIC to support the government's "Go West" strategy, so it will certainly not say goodbye to Xinjiang.

With this structure, VW tries to differentiate itself from the factory. Steg emphasized that the plant is operated by the subsidiary of a joint venture. "Decisions of the joint venture must be made unanimously."

Brandstätter formally visited the factory as a member of the supervisory board of SAIC-VW. There are also VW representatives on the factory operator's supervisory board. The informal structures and the influence of the communist party in the company network cannot be judged from the outside.

How far does the VW Group's responsibility for the factory in the Uyghur province really extend? Steg questioned whether the German Supply Chain Due Diligence Act applies to this non-self-controlled holding at all.

The Chinese company in Xinjiang only delivers cars within the region. The plant does not have suppliers from the region – who may use forced labor – as only finished vehicles are delivered from SAIC VW factories.

In December, a study by Britain's Sheffield Hallam University found that the growing Chinese subcontracting industry operates a large number of plants in Xinjiang. These are not regularly visited by western top managers.

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