'European Detroit' Fear Grips VW Company Town as Scandal Widens

VW Diesel Scandal Widens as CEO Heads for Board Showdown
  • VW employs about half of Wolfsburg's 125,000 residents
  • Company funds university, owns soccer club, theme park

Nowhere is Volkswagen AG’s widening emissions scandal being felt more acutely than in Wolfsburg, the ultimate company town in Germany.

Here, a hundred miles west of Berlin, VW funds the university, runs the biggest museum and owns the local soccer club, which is competing against some of the best teams in the world in the Champions League.

A VW logo sits on display outside the power plant at the Volkswagen AG headquarters in Wolfsburg, Germany, on Wednesday, Sept. 23, 2015.
A VW logo sits on display outside the power plant at the Volkswagen AG headquarters in Wolfsburg, Germany, on Wednesday, Sept. 23, 2015.
Photographer: Krisztian Bocsi/Bloomberg

"If you’d visualize traffic in and out of the city, it would look like a pulse and the heart is the VW plant," cab driver Karsten Raabe says as he steers his Skoda by the sprawling complex, where hundreds of gleaming cars sit in parking lots and on the back of freight trains. “Without VW, this city and the entire region would die. We’d become a European Detroit,” which declared the biggest U.S. municipal bankruptcy in 2013.

More than seven decades after the Nazis built Wolfsburg from scratch to make the original ‘people’s car,’ VW employs about 72,000 people in the city of 125,000. The company’s annual sales have quadrupled over the past two decades to 202 billion euros ($225 billion). The boom has helped drive unemployment down to 4.9 percent, well below the national average.

Even the main tourist attraction is a tribute to VW: Autostadt, a 28-hectare theme park with road-safety tracks and vintage cars that was completed in 2000 for about 400 million euros. And then there are the 7.8 million VW-branded sausages that are made in Wolfsburg and sold nationwide each year.

‘Black Monday’

On Tuesday at Saloniki, a wood-paneled tavern near the central station, six men heatedly debated VW’s admission that it cheated on U.S. emissions tests, sparking an investigation that has wiped about 25 billion euros off the company’s market value.

“Black Monday for VW” read the front-page headline of the local newspaper sprawled on the bar in front of them.

The men discussed details such as how big the fines will be, how many jobs might be cut and what role was played by CEO Martin Winterkorn, who will get a chance to make his case before the executive committee of VW’s supervisory board on Wednesday.

“Volkswagen’s development affects our city in a special way,” Mayor Klaus Mohr, whose office is on a street named after automobile icon Ferdinand Porsche, said in a statement. “In the interest of the city, I hope the necessary clearing up is done quickly and thoroughly.”

Pressure on the automaker is building. The U.S. probe has widened, with VW
setting aside 6.5 billion euros in an initial assessment of potential costs
after concluding 11 million vehicles are affected globally.

Global Probe

Germany’s government plans to send an investigative team to Wolfsburg this week to speak with officials and examine documents. Regulators from France, South Korea and Italy have also vowed to scrutinize the company’s vehicles.

Even in soccer, VW is stumbling. As key supervisory board members held an emergency meeting in a nearby community late Tuesday, its club, VfL Wolfsburg, was thrashed 5-1 by Bayern Munich. A substitute player scored all five goals in the space of nine minutes in the second half.

The people on the street here appear to be holding their breath, hoping for the crisis to pass.

"Everyone knows someone who works at VW," Ivonne Schuckert-Thiele said from behind the counter of a Wolfsburger Nachrichten newsstand and ticket outlet.

Those workers, for now, seem to be quietly rallying around their employer.

Three men and two woman, when asked about the scandal in different parts of the city, all politely declined to comment, saying with a smile or a shrug: “I work at VW.”