Technology

- Volkswagen (VW) in 2023 commissioned a deeply flawed audit at a plant in China's Xinjiang province operated by a subsidiary of Volkswagen’s joint venture with SAIC, a Chinese state-owned carmaker.

- Although the audit found “no indications” of forced labor, audit manager Markus Löning, Germany’s former commissioner for human rights, conceded that the basis for the audit had been a review of documentation rather than interviews with workers, which he said could be “dangerous.”

- Löning added that “even if they [Chinese workers] would be aware of something [like forced labour], they cannot say that in an interview.”

- The NGO Human Rights Watch says that "the Chinese government’s pervasive surveillance and repression in Xinjiang means audits cannot credibly verify whether the facilities in the region are free from forced labor".--

Volkswagen should inform shareholders at its May 29, 2024 annual general meeting how the company plans to eliminate Uyghur forced labor in its operations and supply chains, Human Rights Watch and the European Center for Constitutional and Human Rights (ECCHR) said today.

Since 2017, the Chinese government has perpetrated crimes against humanity in the northwestern Xinjiang region and subjected Uyghurs and other Turkic communities to forced labor inside and outside the region. Aluminum and other key materials used in car manufacturing are produced in Xinjiang by companies with links to government forced labor programs.

“Volkswagen’s ‘In China, for China’ strategy shouldn’t mean complicity in forced labor,” said Jim Wormington, senior researcher and advocate for corporate accountability at Human Rights Watch. “Shareholders should call upon Volkswagen to ensure that it will apply robust measures to tackle Uyghur forced labor in its supply chains.”

Volkswagen, which manufactures cars in China through joint ventures with Chinese carmakers, is failing to adequately investigate potential links between its supply chains in China and forced labor. The company in 2023 also commissioned a deeply flawed audit at a plant in Xinjiang operated by a subsidiary of Volkswagen’s joint venture with SAIC, a Chinese state-owned carmaker. The Chinese government’s pervasive surveillance and repression in Xinjiang means audits cannot credibly verify whether the facilities in the region are free from forced labor.

Volkswagen sells one in three of its cars in China. Volkswagen’s chief executive, Oliver Blume, on April 24 described China as the company’s “second home market.” Blume also announced the company’s updated “In China, for China” strategy, which includes expanded partnerships with Chinese car manufacturers, reduced manufacturing costs, and ambitious sales targets.

Volkswagen said in December 2023 that an audit overseen by Markus Löning, Germany’s former commissioner for human rights, found “no indications” of forced labor at the Xinjiang joint venture plant, which is used to road test cars assembled elsewhere in China. Löning conceded, however, that the basis for the audit had been a review of documentation rather than interviews with workers, which he said could be “dangerous.” He also said that “even if they [workers] would be aware of something, they cannot say that in an interview.”

Following the release of the audit, the German newspaper Handelsblatt on February 14 alleged that a contractor of a SAIC-Volkswagen Xinjiang subsidiary had used Uyghur forced labor during the construction of a Xinjiang test track, which was completed in 2019. In response, Volkswagen said that the 2023 audit of the Xinjiang plant did not include the test track, but that “to date, we have had no indications of human rights violations in connection with the test site.”

Volkswagen also said in February that it is “currently in talks with the non-controlled joint venture SAIC-Volkswagen regarding the future direction of the JVs [joint ventures] business activities in Xinjiang Province. Various scenarios are currently being examined intensively.” Shareholders should ask Volkswagen about the outcome of those discussions and push for the company to end its joint venture operations in Xinjiang.

The production of key materials for car manufacturing in Xinjiang also creates a risk that Volkswagen is sourcing products or materials linked to forced labor, both in factories across China and globally. Nearly 10 percent of the world’s aluminum, for example, is produced in Xinjiang before being shipped out, melted down, and made into products and parts used by car manufacturers and other industries. Aluminum producers in Xinjiang, and in the coal mines and coal plants that supply them, have participated in coercive labor transfers, a form of state-imposed forced labor.

In June 2023, ECCHR filed a complaint with the Federal Office for Economic Affairs and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle, BAFA), the German government authority overseeing the country’s Supply Chain Act. The complaint contends that Volkswagen, BMW, and Mercedes-Benz are violating their obligations under the law by failing to adopt appropriate measures to identify and prevent the risks of state-imposed forced labor in their supply chains. The BAFA has not yet responded publicly to the complaint.

Volkswagen in January told United States customs officials that a small electronic part was produced by a sub-supplier listed by US authorities in December 2023 as linked to Uyghur forced labor. US customs officials impounded vehicles containing the part while Volkswagen replaced it. Human Rights Watch asked Volkswagen on May 22 whether it has removed the part in vehicles sold outside the US but did not receive a response. A US Senate Finance Committee report in May found that Volkswagen had previously investigated the sub-supplier in 2020 and 2022 but found no connections to its supply chain.

Volkswagen is applying inadequate oversight to the supply chains of its Chinese joint ventures, such as SAIC-VW, which primarily manufacture cars for sale in China, the organizations said. Volkswagen contends that, under Germany’s supply chain law, it is not legally required to address human rights impacts in SAIC-VW’s supply chain because its joint venture agreement cedes operational control to SAIC.

Volkswagen in November 2023 told Human Rights Watch that the company “assumes responsibility … to use its leverage over its Chinese joint ventures to address the risk of human rights abuses.” But when asked about potential links between SAIC-Volkswagen and an aluminum producer in Xinjiang, Volkswagen responded: “We have no transparency about the supplier relationships of the non-controlled shareholding SAIC-Volkswagen.”

Volkswagen’s updated China strategy continues to rely on joint ventures and includes partnerships with SAIC and Chinese electric carmaker XPENG. ECCHR’s complaint said that cars manufactured by joint ventures should be considered as being part of Volkswagen’s supply chain, and therefore fall within the scope of its due diligence obligation under the German Supply Chain Act. Human Rights Watch asked Volkswagen on May 22 what steps it will take to ensure that strong human rights and responsible-sourcing standards apply to all current and future joint venture operations in China, but did not receive a reply.

“Volkswagen can’t simply wash its hands of responsibility for its Chinese joint ventures in full knowledge of the risks of forced labor,” said Chloé Bailey, senior legal advisor at ECCHR. “Shareholders should ask Volkswagen how it is responding to increased scrutiny over its operations in China and what steps it is taking to comply with its obligations under the German Supply Chain Act.”