EU probes Volkswagen for alleged misuse of funds

A street sign can be seen in front of the illuminated logo of German car maker Volkswagen on Dec10 in Hanover, central Germany.
A street sign can be seen in front of the illuminated logo of German car maker Volkswagen on Dec10 in Hanover, central Germany. PHOTO: AFP

FRANKFURT (AFP) - Embattled German auto giant Volkswagen faced new troubles Wednesday after the European Union said it was investigating allegations it misused EU funds, while German prosecutors probed car parts maker Bosch and its possible role in the pollution-cheating scandal.

The EU's anti-fraud office OLAF confirmed to AFP that VW was under investigation.

According to the daily Sueddeutsche Zeitung, VW is suspected of having misappropriated EU funds awarded by the European Investment Bank (EIB) to the auto maker for research and development (R&D) purposes.

According to the newspaper, EIB lent 4.6 billion euros (S$7.08 billion) to VW since 1990 for R&D into clean engines.

OLAF refused to comment on the investigation and insisted that the decision to launch a probe did not signify any culpability on the part of VW.

The carmaker said it knew nothing about the probe.

"We're surprised that the authorities make public this information without informing those involved first," a spokesman told AFP.

VW was "has been in discussions with the EIB for months" and the atmosphere was one of trust, the spokesman said.

VW is engulfed in a scandal of global proportions after admitting in September that it had installed pollution-cheating software into 11 million diesel engines worldwide.

In Germany, public prosecutors in Stuttgart are investigating the possible role of auto parts maker Bosch in the affair, as it supplied engine software solutions to VW.

"We're investigating X, which is a company that may have helped supply a major carmaker with the software," a spokesman for the prosecutors said, adding that she could not name the companies involved for confidentiality reasons.

Bosch was not immediately available to comment.

Meanwhile, in London the European Bank of Reconstruction and Development (EBRD) confirmed a press report which said it had halted a loan of 300 million euros to VW destined to finance a new production plant in Poland.

"Negotiations on the payment of the credit are currently frozen," an EBRD spokesman said.

The loan had been approved in principle in June.

Nevertheless, a spokeswoman for VW's Polish operations insisted that neither the investment nor its funding was in jeopardy.

"Construction work is going ahead as planned," she said.