Volkswagen picks firm for Xinjiang site labour audit -sources

SHANGHAI/FRANKFURT/BERLIN (Reuters) – Volkswagen has found a company to conduct a labour audit at a site in Xinjiang, China, which it jointly owns with SAIC Motor Corp, two people familiar with the matter said, after pressure from investors for further due diligence.

The sources, speaking on condition of anonymity, did not name the company in order not to jeopardise the process, which has become a key issue for some shareholders who are concerned about allegations of human rights abuses in the region.

Volkswagen investors at a shareholder meeting in May demanded that the carmaker request cooperation from its joint venture partner to conduct an independent audit of labour conditions at the site in Xinjiang, a region where rights groups have documented abuses including mass forced labour in detention camps.

China has denied all allegations of human rights abuses in the region.

It would be a rare move for the Chinese government to allow such an audit to be carried out.

Volkswagen plans to update investors on the status of the audit when it releases its third-quarter results on Oct. 26, two separate sources said.

Volkswagen declined to comment on details of the audit, only confirming that it planned to carry out the audit by the end of 2023 and that it was in discussions with its Chinese partners about the matter.

SAIC did not immediately respond to a request for comment.

Volkswagen’s China chief in February visited the site, which does not produce vehicles but runs quality checks on cars for sale in the region and said he saw no signs of forced labour but investors insisted on an external evaluation.

Executives at the carmaker have made clear that the audit will not necessarily immediately resolve one of the issues which motivated investors to demand it: the ‘red flag’ placed on Volkswagen stock by global index provider MSCI, the sources said.

The index provider marked Volkswagen stock as ‘red’ in the social issue category last November due to allegations of forced labour in Xinjiang, prompting some investors to drop the stock from their portfolios.

Volkswagen deemed the classification “factually incorrect” and has said it is in dialogue with MSCI.

(Reporting by Zhang Yan, Christoph Steitz and Victoria Waldersee; editing by Friederike Heine and Jason Neely)