Volkswagen sells controversial China factory

A Volkswagen factory in Urumqi has been criticized for years for possible human rights abuses. Volkswagen had hoped to separate from the factory earlier – and now it has succeeded.

Max Hagler/Times Online

It may be the smallest factory in the Volkswagen Group, but it is the most controversial: In recent years, Volkswagen has been preparing to deliver new cars in Urumqi, northwest China. It's all over now. The car company has sold the factory that Volkswagen operates jointly with Chinese state-owned SAIC Motor. “The site is being sold for economic reasons as part of a strategic realignment of the joint venture,” the company said on Wednesday.

Until recently, about 170 employees in Urumqi prepared Volkswagen vehicles built elsewhere before eventually being shipped to customers in the region. When the branch was established in 2013, it already faced criticism. Urumqi is located in Xinjiang Province, China. There are reports that Uyghurs living there have suffered years of human rights abuses. As a result, conditions at the small factory and associated test track have been repeatedly called into question, with possible accusations of forced labor.

Volkswagen said a review of conditions several months ago found no evidence of violations. However, experts have questioned the possibility of an independent review of such allegations in this Chinese region. Regardless, the matter adds to growing tensions between car companies and investors, who increasingly value transparent compliance with social and legal standards.

The state government and works council of Lower Saxony, Volkswagen's majority shareholder, have also become increasingly vocal in their intervention. Chancellor Stephan Weil (SPD) recently spoke of “worrying” reports that needed to be investigated: “All business activities of Volkswagen and its partners must comply with fundamental and human rights.”

Volkswagen hopes to get rid of mini factories soon

The management of Volkswagen China boss Ralf Brandstätter wants the sale to begin sooner rather than later, given the uproar at the site and the site's low importance. But negotiations reportedly dragged on for more than a year. Since Volkswagen jointly operates the plant with its Chinese partner SAIC Motor, a sudden unilateral withdrawal would be considered a breach of contract and could cause major turmoil in Volkswagen's most important market.

Volkswagen operates the Urumqi plant with Chinese partner SAIC Motor, complicating a quick sale.
Picture: www.imago-images.de

Volkswagen and SAIC want to build more electric cars

Now, the restructuring of the entire joint venture between Volkswagen and SAIC provides the opportunity to close that chapter. On the one hand, contracts with partners will be extended until 2040 and adapted to China's rapidly changing market: partners will produce more electric vehicles in China than previously planned. On the other hand, some locations are downsizing or closing, including the smallest location in Urumqi. The plant will be taken over by Shanghai Motor Vehicle Inspection Center, a relatively unknown Chinese state-owned enterprise.

This article first appeared on Zeit Online. Watson may have changed the title and subtitle. Click here to view the original article.

A Volkswagen factory in Urumqi has been criticized for years for possible human rights abuses. Volkswagen had hoped to separate from the factory earlier – and now it has succeeded.

It may be the smallest factory in the Volkswagen Group, but it is the most controversial: In recent years, Volkswagen has been preparing to deliver new cars in Urumqi, northwest China. It's all over now. The car company has sold the factory that Volkswagen operates jointly with Chinese state-owned SAIC Motor. “The site is being sold for economic reasons as part of a strategic realignment of the joint venture,” the company said on Wednesday.