S&P: Scandal Won′t Hurt VW′s Ratings | Business| Economy and finance news from a German perspective | DW | 20.07.2005
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S&P: Scandal Won't Hurt VW's Ratings

The bribery and corruption scandal engulfing Volkswagen is unlikely to harm the debt ratings of Europe's biggest carmaker, the international credit rating agency Standard & Poor's said on Wednesday. Nevertheless, the affair did throw a spotlight on the possible shortcomings of boardroom decision-making in Germany, where workers had nearly equal say with management, S&P said. The scandal in which company funds were allegedly used to provide inappropriate benefits to members of VW's works council "highlights the possible pitfalls of the system of co-determination that is prevalent in the German business environment," the agency wrote in a report. "Although the incident has no immediate effect on the ratings or the outlook on the group, it does demonstrate how the co-determination system can be abused in ways that may not favor the long-term interests of a company as a whole, including the interests of its creditors and shareholders," said S&P analyst Maria Bissinger. S&P now has an A-minus ("A-") rating on VW's long-term debt with negative outlook. The carmaker's short-term debt is "A-2." VW is currently at the center of a bribery and corruption scandal, which has so far cost the jobs of three top-ranking managers and the head of VW's general works council. Among the allegations are claims that executives made available an unchecked amount of funds to pay for pleasure trips for members of the works council, stays in luxury hotels and even visits by prostitutes.

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