Volkswagen Says No Human-Rights Abuses at Downsized Xinjiang Plant in China

Ralf Brandstätter,

the company’s China chief, traveled to the site in mid-February to try to allay concerns, and this week said he saw no human-rights violations. His visit also highlighted Volkswagen’s other problem with the plant: It has fallen short of big plans the company and its joint-venture partner, the Shanghai government-owned

SAIC Motor Corp.

600104 0.13%

, initially had for it.

The plant in Xinjiang’s provincial capital of Urumqi was the first passenger-car factory in China’s northwest, complete with body, paint and final-assembly workshops built to German standards, and planned to produce up to 50,000 vehicles a year.

At one point, its output reached around 20,000 cars annually but has since declined, Mr. Brandstätter’s predecessor said last year.

Now, no vehicles are made in the factory’s car-assembly workshops, Volkswagen said. Instead, up to 10,000 cars assembled in eastern China are sent to the Xinjiang factory each year for parts and electrical checks, as well as system testing. They are then sold off in the region.

“The business model has changed. There is currently no production of our own,” Mr. Brandstätter said this week after the first visit in nearly two years by a Volkswagen senior executive to the site. Chip-supply issues, as well as China’s Covid-19 curbs, contributed to the joint venture downsizing its workforce by almost two-thirds in recent years.

Much is at stake for Volkswagen in China. The country is its largest single market. Its joint ventures there made up around 14% of its operating income in 2021, according to the group’s annual report. The Chinese operation sold around three million vehicles made at plants across the country.

Mr. Brandstätter said this week that he saw no evidence of human-rights violations during his visit. Of the 240 people working there, almost 30% of them are ethnic minorities, Volkswagen said.

The visit drew renewed criticism at home. The Volkswagen works council, which represents employees on the company’s supervisory board, said it must be made clear to what extent the Urumqi plant extends its values beyond the factory fence there.

“We request German companies to do a lot more than just look into the situation, but to react to it,” said

Boris Mijatovic,

the German Green Party’s spokesman for human rights.

Volkswagen can’t make key decisions related to the plant on its own because it doesn’t control the 50-50 joint venture, company executives said this week.

“The question of whether we close the plant does not arise,” Mr. Brandstätter said. “For one thing, there is no basis for discussion with SAIC on this, and for another, the closure would only be a symbolic action with harsh consequences for the workers.”

For any decision to be made, Volkswagen and SAIC must agree, he said. Volkswagen nevertheless takes serious responsibility for the factory, and the company commits to observing basic values and the law, Mr. Brandstätter said.

SAIC didn’t respond to a request for comment.

Last year, Volkswagen’s previous China head said the company and SAIC decided to keep operating the plant for business reasons. SAIC had told Volkswagen the company would do more harm than good if it were to shut down the factory for political reasons, he said at the time.

Volkswagen’s Urumqi venture was intended to spearhead manufacturing in China’s underdeveloped far west, generating hundreds of jobs.

At the German auto maker’s headquarters in Wolfsburg,

Angela Merkel

and

Wen Jiabao

—then Germany’s chancellor and China’s premier, respectively—smiled as they watched over executives signing the deal in 2012. The Urumqi plant started operating the following August.

In 2014, Volkswagen’s joint venture said that it would help promote automobile talents and technology in the region, and it donated to a university in Urumqi to jointly develop automation-related research labs.

The Chinese government’s approach to Xinjiang—bordering Central Asia and home to millions of Turkic-speaking Uyghurs and other predominantly Muslim minorities—started to tighten following a surge in deadly terrorist attacks around the country in 2014 that authorities blamed on Xinjiang-based militants.

Besides heavy policing and intense electronic monitoring surveillance throughout the region, China began to target Xinjiang’s mostly Muslim ethnic minorities with mass-detention internment camps as part of a yearslong campaign of forcible assimilation. Beijing has described the camps as vocational training facilities designed to improve livelihoods and combat religious extremism.

Human-rights groups and Western researchers have alleged that the government forced Uyghurs and other Turkic Muslims from the region to work at factories around the country through what it called labor-transfer programs. Multinational firms came under pressure from human-rights groups to eliminate forced labor from their supply chains in China.

Beijing has denied using forced labor. It has said state-run transfers of Uyghur, Kazakh and other mostly Muslim minority laborers are part of poverty-alleviation programs.

In 2020, Australian Strategic Policy Institute, a government-backed think tank, alleged in a report that a Chinese electronics producer was taking in Uyghurs workers under the government program and that this company was linked to Volkswagen.

Volkswagen has said that none of the companies named in the report was a direct supplier. It has also said it found no further indications that forced labor of Uyghurs is a part of its supply chain, as well as of its joint ventures with SAIC and FAW Group Co.

“There is agreement that we do not tolerate human-rights violations,” Mr. Brandstätter said this week.

Write to Yoko Kubota at [email protected] and Selina Cheng at [email protected]

Ralf Brandstätter,

the company’s China chief, traveled to the site in mid-February to try to allay concerns, and this week said he saw no human-rights violations. His visit also highlighted Volkswagen’s other problem with the plant: It has fallen short of big plans the company and its joint-venture partner, the Shanghai government-owned

SAIC Motor Corp.

600104 0.13%

, initially had for it.

The plant in Xinjiang’s provincial capital of Urumqi was the first passenger-car factory in China’s northwest, complete with body, paint and final-assembly workshops built to German standards, and planned to produce up to 50,000 vehicles a year.

At one point, its output reached around 20,000 cars annually but has since declined, Mr. Brandstätter’s predecessor said last year.

Now, no vehicles are made in the factory’s car-assembly workshops, Volkswagen said. Instead, up to 10,000 cars assembled in eastern China are sent to the Xinjiang factory each year for parts and electrical checks, as well as system testing. They are then sold off in the region.

“The business model has changed. There is currently no production of our own,” Mr. Brandstätter said this week after the first visit in nearly two years by a Volkswagen senior executive to the site. Chip-supply issues, as well as China’s Covid-19 curbs, contributed to the joint venture downsizing its workforce by almost two-thirds in recent years.

Much is at stake for Volkswagen in China. The country is its largest single market. Its joint ventures there made up around 14% of its operating income in 2021, according to the group’s annual report. The Chinese operation sold around three million vehicles made at plants across the country.

Mr. Brandstätter said this week that he saw no evidence of human-rights violations during his visit. Of the 240 people working there, almost 30% of them are ethnic minorities, Volkswagen said.

The visit drew renewed criticism at home. The Volkswagen works council, which represents employees on the company’s supervisory board, said it must be made clear to what extent the Urumqi plant extends its values beyond the factory fence there.

“We request German companies to do a lot more than just look into the situation, but to react to it,” said

Boris Mijatovic,

the German Green Party’s spokesman for human rights.

Volkswagen can’t make key decisions related to the plant on its own because it doesn’t control the 50-50 joint venture, company executives said this week.

“The question of whether we close the plant does not arise,” Mr. Brandstätter said. “For one thing, there is no basis for discussion with SAIC on this, and for another, the closure would only be a symbolic action with harsh consequences for the workers.”

For any decision to be made, Volkswagen and SAIC must agree, he said. Volkswagen nevertheless takes serious responsibility for the factory, and the company commits to observing basic values and the law, Mr. Brandstätter said.

SAIC didn’t respond to a request for comment.

Last year, Volkswagen’s previous China head said the company and SAIC decided to keep operating the plant for business reasons. SAIC had told Volkswagen the company would do more harm than good if it were to shut down the factory for political reasons, he said at the time.

Volkswagen’s Urumqi venture was intended to spearhead manufacturing in China’s underdeveloped far west, generating hundreds of jobs.

At the German auto maker’s headquarters in Wolfsburg,

Angela Merkel

and

Wen Jiabao

—then Germany’s chancellor and China’s premier, respectively—smiled as they watched over executives signing the deal in 2012. The Urumqi plant started operating the following August.

In 2014, Volkswagen’s joint venture said that it would help promote automobile talents and technology in the region, and it donated to a university in Urumqi to jointly develop automation-related research labs.

The Chinese government’s approach to Xinjiang—bordering Central Asia and home to millions of Turkic-speaking Uyghurs and other predominantly Muslim minorities—started to tighten following a surge in deadly terrorist attacks around the country in 2014 that authorities blamed on Xinjiang-based militants.

Besides heavy policing and intense electronic monitoring surveillance throughout the region, China began to target Xinjiang’s mostly Muslim ethnic minorities with mass-detention internment camps as part of a yearslong campaign of forcible assimilation. Beijing has described the camps as vocational training facilities designed to improve livelihoods and combat religious extremism.

Human-rights groups and Western researchers have alleged that the government forced Uyghurs and other Turkic Muslims from the region to work at factories around the country through what it called labor-transfer programs. Multinational firms came under pressure from human-rights groups to eliminate forced labor from their supply chains in China.

Beijing has denied using forced labor. It has said state-run transfers of Uyghur, Kazakh and other mostly Muslim minority laborers are part of poverty-alleviation programs.

In 2020, Australian Strategic Policy Institute, a government-backed think tank, alleged in a report that a Chinese electronics producer was taking in Uyghurs workers under the government program and that this company was linked to Volkswagen.

Volkswagen has said that none of the companies named in the report was a direct supplier. It has also said it found no further indications that forced labor of Uyghurs is a part of its supply chain, as well as of its joint ventures with SAIC and FAW Group Co.

“There is agreement that we do not tolerate human-rights violations,” Mr. Brandstätter said this week.

Write to Yoko Kubota at [email protected] and Selina Cheng at [email protected]