VW do Brasil in the Brazilian Military

Dictatorship 1964 -1985

A Historical Study

Christopher Kopper
VW do Brasil in the Brazilian Military
Dictatorship 1964 -1985
A Historical Study

Christopher Kopper
 TA B L E O F C O N T E N T S

1. Introduction 3

2. From the founding of VW do Brasil to the military coup 9

on March 31, 1964

3. VW do Brasil and the military coup on March 31, 1964 17

4. Industrial relations at VW do Brasil during the dictatorship 25

5. The development of VW do Brasil during the 39

Brazilian Economic Miracle (1968-1974)

6. VW do Brasil and the persecution of political opponents 53

of the military regime

7. Pay and working conditions at VW do Brasil 67

in the 1960s and 1970s

8. The strikes of 1978, 1979 and 1980 75

9. Change in economic crisis: the democratisation 93

of industrial relations at VW do Brasil
in the early 1980s

10. VW do Brasil as a major land-owner, and the social 107

and ecological consequences: the Rio Cristalino project

11. Franz Stangl: a concentration camp commandant 117

as an employee of VW do Brasil

12. Results 125

1
1. Introduction

← Aerial shot of the São Bernardo

do Campo plant, 1979

← Previous page:
Assembly plant in Ipiranga,
São Paulo, 1953

3
INTRODUCTION

This study was commissioned in response to recent events. In 2014, a detailed 1

report by the Brazilian Truth Commission revealed to the country the extent of For example, a Spiegel Online headline on
human rights violations and political murders during the period of military November 1, 2015 read: “VW will Verwick-
dictatorship 1964-1985. The report confronted VW do Brasil with allegations of lungen in brasilianische Diktatur aufarbeit-
collaboration with the Political Police and of discrimination against trade union en” [VW seeking to reappraise involvement
activists. When trade unionists filed a civil suit against VW do Brasil with the in Brazilian dictatorship],
Justice Ministry of São Paulo state in September 2015, the news was picked up (http://www.spiegel.de/wirtschaft/
by Latin American information services and German media correspondents, and unternehmen/volkswagen-in-
reached the German public.1 brasilien-vw-will-diktatur-­geschichte-
aufarbeiten-a-1060622.html,
Group board member for integrity and legal affairs Dr. Christine Hohmann- accessed June 16, 2017).
Dennhardt commissioned a comprehensive investigation into the allegations in
November 2016. Although VW do Brasil’s shared responsibility for human rights
violation is at the heart of this study, its involvement in political repression by the
military regime is not considered in isolation from the economic development of
the company. This study also considers the general relationship of VW do Brasil
managements and of the German parent company to the political leaders of the
dictatorship, and examines the economic interests, colonialist ideas and political
stereotypes, as well as the structures of economic opportunity, which determined
patterns of behaviour in relation to, and within, the dictatorship. It also aims to
show how the management of the former Volkswagenwerk AG in Wolfsburg
perceived developments at their Brazilian subsidiary, and the point from which –
and the reasons why – the management board committed to creating a democratic
and participatory corporate culture at VW do Brasil.

4
 INTRODUCTION

2 During the 1960s VW do Brasil grew into the Volkswagen Group’s biggest member-
In this regard refer to the excellent over- company outside Germany, and became the fifth-largest industrial concern in Brazil.
view by Sebastian Brünger in “Geschichte An extensive study of the history of VW do Brasil will reveal the importance of the
und Gewissen: Der Umgang deutscher Brazilian subsidiary to the economic development of VW AG. Linked to this are the
Konzerne mit ihrer NS-Vergangenheit” fundamental questions of whether VW – thanks to its position as a highly dynamic
[History and conscience: the response of business, and being the largest foreign industrial corporation in Brazil – was able to
German companies to their Nazi past], enjoy special privileges in terms of tax breaks, subsidy policy and foreign exchange
Göttingen 2017. Knud Andresen has laws in the context of the Economic Dependency Theory, or whether the Brazilian
written a paper on the relationship of government was able to assert what by today’s standards would have been a high
German car manufacturers to South Africa’s degree of market regulation and control over the appropriation of corporate profits.
Apartheid regime (“Moralische Ökonomie:
Bundesdeutsche Automobilunternehmen A key question in this context is whether VW do Brasil profited not only from the
und Apartheid” [Moral economics: German dictatorship’s economic policies, but also from its domestic and legal policies.
car companies and Apartheid], in: The Brazilian military dictatorship abolished basic employees’ rights such as the
Zeithistorische For­schungen/Studies in right to strike, replaced the freedom of employers and employees’ representatives
Contemporary History 13 (2016), issue 2, to negotiate pay rates by a state-controlled wage structure, and suppressed
pp. 231-253). Regarding VW in South Africa the organised labour movement up until 1978. These major restrictions of
refer also to Claudia Nieke, “Volkswagen fundamental social and economic rights did not remain without consequences in
am Kap: Internationalisierung und terms of wage trends and the working and living conditions of the workforce.
Netz­werk in Südafrika 1950 bis 1966”
[Volkswagen on the Cape: This study is the first publication to appraise the behaviour of a German
Internationalisation and networking in company in a post-war dictatorial regime. While numerous empirically fruitful
South Africa 1950 to 1966], Wolfsburg and well-designed studies have been produced over the last 30 years in relation
2010, though that paper deals to a lesser to the conduct of German companies during the era of National Socialism, the
extent with the response of VW to the relationship of German companies to right-wing dictatorial regimes in Southern
Apartheid regime. Europe, Latin America, Asia and Africa has been little studied to date.2

Compared to the extremely extensive, thematically and methodologically very

wide-ranging research into National Socialism, research into the Brazilian military
dictatorship remains little advanced. While mainly American economists have
studied the macro-economic development of Brazil, and political scientists have
detailed the developments in police repression policies and the gradual return
to the rule of law and pluralism since 1979, there has been as yet little research
into Brazil’s social history and the development of corporations in the country
during the military dictatorship. It was as recently as 2014 that the National Truth

5
INTRODUCTION

Commission instigated by the Rousseff government published a detailed report 3

on political persecution and the collaboration of state and non-state actors with Regarding the handover of the Political
the Political Police. Police files refer to Maria Aparecida de
Aquino et al., “O dissecar da estructura
Although the files of the Political Police provide some insight into the collaboration administrativa do DEOPS/SP”, São Paulo
of company security services with policing bodies, the extent of that collaboration 2002; idem. et al., “O DEOPS/SP em busca
can be estimated but not reconstructed in full, as an unknown quantity of files have do crime politica: Familia 50”, São Paulo
been destroyed. The files of the Political Police in São Paulo state were held – from 2002.
the time of the organisation’s abolition in 1982 until they were transferred to the
Arquivo do Estado de São Paulo [São Paulo state archive] in 1994 – in the custody of the
Police Commissioner, who until 1982 had commanded the Political Police, and so had
no great interest in providing the world with a complete legacy after his departure.3

The Corporate History Department of Volkswagen AG has made a major

contribution to this study. Special thanks go to Dr. Ulrike Gutzmann, who
comprehensively searched through all the key files in the Group archives relating
to VW do Brasil, as well as providing excellent working conditions for evaluation
of the files. Thanks also go to the General Works Council of VW for giving consent
to inspect its historical records. And thanks are also due to the Group board
members for integrity and legal affairs, Dr. Christine Hohmann-Dennhardt and
from February 2017 Hiltrud Werner, who supported the research not only through
their funding, but also through their personal interest.

Although VW do Brasil has in recent decades destroyed almost all records of

historical significance on expiration of their statutory retention periods, the staff
of the Corporate History Department has made every conceivable effort to locate
documents from company and state archives. Most sincere thanks are due to
archivist Clarice Caires, who has been building up the VW do Brasil archive since
2013, and who was a great help in evaluating Political Police files in the São Paulo
state archive. Thanks are also due to Andre Senador and Daniel Tadashi, who
have supported the project actively and without reservation, and who showed
the author the rightly famous Brazilian hospitality. Susanna Berhorn de Pinho
translated innumerable documents into German, saving the author the trouble of
having to get by with his only recently acquired knowledge of Portuguese.

6
INTRODUCTION

7
2. From the founding of VW do Brasil
to the military coup on
March 31, 1964

← Official opening of the plant in

São Bernardo do Campo on
November 18, 1959: Front left
seated, Heinrich Nordhoff, General
Director of Volkswagenwerk GmbH;
at the rear, waving, Brazilian
President Juscelino Kubitschek

9
F R O M T H E F O U N D I N G O F V W D O B R A S I L T O T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

The history of VW do Brasil began on March 23, 1953, at a time when the 4
Volkswagenwerk GmbH was just establishing itself on export markets outside A brief summary of the early history of VW
Europe. It was on that day that Volkswagen GmbH in São Paulo founded Umitada in Brazil can be found on the VW do Brasil
GmbH as an operating company to assemble the VW Beetle (designated internally website (www.vwbr.com.br/ImprensaVW/
as the Type 1) from single components at the premises of Brazilian corporation page/Historia.aspx, accessed on May 11,
Brasmotor.4 In July 1954, after Brasmotor had terminated the contract, the 2017). Refer also to the disclosures as to the
shareholders’ meeting of the then VW GmbH approved an amount of five million initial capital in the VW Archive Wolfsburg
Deutschmarks for the purchase and redevelopment of a proprietary assembly (UVW), 69/345/1. The work by Volker Well-
plant in Brazil.5 But it was not until 1955 that the legal framework for a more höner, “‘Wirtschaftswunder’, Weltmarkt,
substantial direct investment was established between the Brazilian government westdeutscher Fordismus” [‘Economic
and the German federal government. On July 12, 1955 VW founded a Brazilian miracle’, global market, West German
subsidiary in the legal form of a stock corporation (VW do Brasil Sociedade Fordism], Münster 1996, pp. 259-296, is
Anonima) and took over the assembly plant in São Paulo. still fundamental to the history of VW do
Brasil through to the early 1960s.
The assembly plant on Rua do Manifesto in the Ipiranga district was the first site
to assemble Volkswagens outside Germany. The decision to establish the first 5
international production facility in a still mainly agricultural country outside Helen Shapiro, “Engines of growth: The
Europe was influenced by a number of considerations. Although the Brazilian state and transnational auto companies in
car market at that time was still small, Brazil offered significant potential for Brazil”, Cambridge 1994, p. 78f.; Wellhöner,
economic growth as the largest single market in Latin America. Since Latin “Westdeutscher Fordismus” [West German
American countries had been enjoying rapid economic growth both during Fordism], pp. 269.
and after the Second World War based on the increased demand for agricultural
products in the USA and Europe, Brazil – alongside Argentina – was seen as a major 6
industrial centre of the future. Helen Shapiro, “Engines of growth”,
pp. 48-51.
The key reasons behind the decision to import VW Beetle components into Brazil
as CKD (Completely Knocked Down) kits for assembly in-country related to trade
policy. In view of the high import duties on ready-assembled vehicles, it made
financial sense to relocate the assembly process to Brazil. Since international
payment transactions were regulated by government-set exchange rates, and the
Brazilian government differentiated between economically essential and non-
essential goods, the exchange rate for vehicle components was 40% lower than for
complete vehicles.6 The major advantages in terms of duties and exchange rates
balanced out the disadvantage that VW do Brasil assembled only 2,268 Beetles
and 552 VW vans (Type 2) from 1953 to 1957, and productivity was initially low
because of the low volumes.

Right from the time VW do Brasil was established, VW General Director Heinrich
Nordhoff (1899-1968) had considered building a full manufacturing plant in Brazil,
but he did not want to commit to a medium-term plan in view of the uncertain

10
 F R O M T H E F O U N D I N G O F V W D O B R A S I L T O T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

7 sales forecasts and the unpredictable political situation in the country. However,
Wellhöner, “Westdeutscher Fordismus” in 1956 the Brazilian government’s very determined industrialisation policy
[West German Fordism], pp. 269f. forced VW to make a quick decision in favour of building a complete car factory
in Brazil. Notwithstanding his persisting scepticism as to the chances of success
for a complete car factory, the alternatives Nordhoff faced were either to invest in
a full manufacturing facility or to give up on the Brazilian market permanently.
The so-called Target Plan of the democratically elected government of Juscelino
Kubitschek in 1956 set forth the goal of establishing a fully operational domestic
automotive industry by 1960, and replacing almost all imports of complete
vehicles or CKD kits by cars and trucks from domestic production. To manage
this programme of industrial autonomy, the Brazilian government established an
inter-ministerial steering group for the development of the automotive industry
(Grupo Executivo da Industria Automobilistica – GEIA). It laid down binding rules
for the industry, which at the time was almost exclusively in foreign hands.

The plan to build a domestic automotive industry was not a stand-alone

element within Brazil’s economic policy, but rather formed the cornerstone
of a highly ambitious development programme. The newly elected President
Kubitschek tagged this development programme with the populist slogan “50
years of progress in a 5-year term”. The most visible element of the development
programme was the construction of the new capital city Brasilia in the geographic
centre of the country – an undertaking which drew worldwide acclaim thanks to
its futuristic architecture and urban planning concept.

The General Plan of the GEIA for Brazil’s auto industry demanded no less than
that by July 1, 1960 manufacturers should be building all passenger cars from
a minimum of 95% locally produced components. The target for vans and
commercial vehicles such as the VW Transporter was an only slightly lower 90%.
VW and the other foreign auto makers on the Brazilian market, such as General
Motors, Willys-Overland and Ford, were faced by the decision either to invest in
complete manufacturing facilities or to abandon the Brazilian market. As the 95%
local content quota also applied to supplies by other companies, large German
auto component suppliers such as Bosch also established facilities close to their
customers.

In view of the fact that the São Paulo assembly plant was situated in a densely
built-up area, and could not be extended, in 1955 VW do Brasil acquired a large
site 20 km to the south, in the industrial town of São Bernardo do Campo, which
was suitable for the construction of a complete auto plant.7 Thanks also to other
foreign vehicle manufacturers such as Willys-Overland, Ford, Mercedes-Benz and

11
F R O M T H E F O U N D I N G O F V W D O B R A S I L T O T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

Scania opening facilities there, the town of São Bernardo do Campo, which had 8
thus far been predominantly home to furniture-makers, grew into the centre of Shapiro, “Engines of growth”, p. 252;
the Brazilian auto industry (Capital do automóvels, or auto capital) – in a sense, the in: UVW, Z 1184, no. 355/3.
Detroit of Latin America. The VW plant had no rail link, but was situated directly on
the Via Anchieta, the road linking the São Paulo conurbation with the port city of 9
Santos, which was gradually upgraded to become a crossing-free highway. VW do Wellhöner, “Westdeutscher Fordismus”
Brasil initially relocated its Transporter operation to the only partially completed [West German Fordism], p. 288.
new facility, where production began on September 2, 1957. Fully operational
status was attained on January 3, 1959 with the start of production of the Beetle. 10
At that time VW do Brasil was still sourcing its engine from Germany. As Brazilian Shapiro, “Engines of growth”, p. 52;
component suppliers were unable to fully keep pace with the required growth, the regarding Brazilian foreign exchange policy
95% local content target was still not being met by mid-1960. On June 30, 1961 up to 1961 refer to the standard work by
the local content of the VW Beetle reached 92%, will that of the VW Bulli even Werner Baer, “The Brazilian Economy:
reached 94.6%.8 The GEIA penalised VW do Brasil for this failure to meet its targets Growth and Developement”, Boulder 2008,
by imposing an import tariff of 90% rather than 5% on engine components, with pp. 55-60.
effect from the start of 1962 until such time as all its engines were manufactured
from local content.9

The Brazilian government expected to see a big boost to growth from the new VW
plant, and hoped that VW’s strong commitment would break the dominance of the
US companies General Motors, Ford and Chrysler in the Brazilian auto industry.
Consequently, President Kubitschek attended the official opening ceremony
of the facility on November 18, 1959 in person. VW General Director Heinrich
Nordhoff had also come from Germany specially for the occasion. Photographs
of Kubitschek and Nordhoff riding through the factory together in an open-top
VW convertible past an honour-guard of rejoicing workers were printed in the
Brazilian press, and brought VW considerable public prestige. The President’s
participation in the opening ceremony served as a symbolic validation of VW do
Brasil by the nation’s head of state which was important in raising the company’s
standing.

The high investment cost in the VW São Bernardo plant was mitigated by a
bundle of trade, foreign exchange and credit policy incentives. The Brazilian
administrative body overseeing foreign exchange and credit (Supenintendencia da
Moeda e do Crédito – SUMOC) exempted auto manufacturers from the obligation
to pay an advance deposit, subject to interest charges, on their equipment and
machinery imports. In the growth period of the Brazilian auto industry in the
late 1950s and early 1960s, imports of capital goods by foreign investors such as
VW were exempted from duties. Whereas importers normally had to purchase
their imports by auction from SUMOC at an exchange rate above the official rate

12
 F R O M T H E F O U N D I N G O F V W D O B R A S I L T O T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

11 parity, VW do Brasil received a portion of the required DM amounts for machinery

Shapiro, “Engines of growth”, pp. 142f. Up imports from Germany at a much more favourable fixed rate.10 From 1956 to
to 1960 the US Dollar exchange rate was 1960, VW do Brasil was able to import capital goods to a value of US$ 11.2 million
DM 4.20; from 1960 to 1969 it was DM (DM 46.9 million based on the exchange rate at the time), mainly from Germany,
4.00. achieving an estimated 25% (DM 11.9 million) cost-saving on the exchange rate.11

12 Additionally, in 1959 and 1960 VW do Brasil received low-interest loans from the
Ibid., p. 145-148. SUMOC totalling US$ 4.3 million (DM 18.1 million), repayable by 1967.12 Although
the interest rate subsidy was small, the government loans considerably aided
13 the financing of the VW plant in Brazil, as they correspondingly reduced the
Calculated according to the information funding needed from parent company VW. In March 1958, Brazil’s state economic
contained in Shapiro, “Engines of growth”, development bank BNDE (Banco Nacional do Desenvolvimento Economico)
pp. 152f; and the exchange rate chart des granted VW do Brasil a 150 million Cruzeiro loan (based on the exchange rate at
Institute of Brazilian Business & Public the time equivalent to US$ 1.4 million, or DM 5.9 million) at a reduced interest rate
Management Issues at George Washington of 11%. Since the standard interest rates offered by Brazilian commercial banks
University, Washington DC (www2. between 1958 and 1960 averaged 23%, and the loan had a term of five years, the
gwu.edu/~ibi/database/Exchange_ interest subsidy over the full term equated to DM 3.5 million.13 At an average
Rate_1954-present.pdf, accessed May 11, annual inflation rate of 39.5% (1958 to 1963), VW achieved a negative real interest
2017). All further amounts in Cruzeiros rate of 28.5% each year, equating to a monetary benefit of DM 8.4 million over five
have been converted into Dollars on the years.14
basis of that table, and into DM using the
exchange rate statistics of the German Within just a few years of the opening of the São Bernardo plant, VW do Brasil
Bundesbank. attained market leadership in the Brazilian automotive sector. The key factor in
the company’s success on the Brazilian market, alongside the cost-effective mass
14 production of a single model (the VW Beetle), was the product itself. The lowest-
Inflation rates according to Baer, “Brazilian priced models from the major competitors GM and Ford were bigger, heavier,
Eeconomy”, p. 410. and more expensive both to buy and to run. VW do Brasil’s sole competitor in
the family-friendly small car segment, through until the entry onto the market
15 of Simca and Fiat in the late 1960s, was the Renault Dauphine, which was built
Wellhöner, “Westdeutscher Fordismus” under licence for the Brazilian market by Willys-Overland.15 However, the Renault
[West German Fordism], pp. 283-286. Dauphine began to lose ground against the Beetle as early as 1960, and was unable
to gain a solid foothold on the Brazilian market.
16
In view of the major inequalities in Thanks to its low purchase price, the VW Beetle was ideal for a market with a low
Brazilian society in terms of income, assets average per capita income and a small and only slowly growing middle class.16
and educational opportunities, and the Its unique technical selling points such as the air-cooled engine (beneficial for
long-standing lack of social mobility, the the subtropical climate) and robust chassis, with big wheels and a comparatively
term is appropriate in describing the class high wheelbase, made it well suited to driving in a country which in the 1960s
structure during the period under analysis. and 1970s still predominantly featured unasphalted roads outside of the major
urban conurbations. Design weaknesses such as the poor heater were irrelevant

13
F R O M T H E F O U N D I N G O F V W D O B R A S I L T O T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

in Brazil’s subtropical climate.17 The model’s service-friendliness and relatively 17

simple engine and chassis design helped it succeed in what was initially still The Beetle was sold without a heater in
an underdeveloped country. To keep the selling price down, costly equipment Brazil up until the 1970s, as a means of
feature upgrades were introduced later than in Germany. While the hot climate cutting production costs and keeping down
meant that a heater could be omitted with no impairment of comfort, the delayed the selling price.
introduction of important safety features represented dubious decision-making
in terms of corporate ethics. As one example, the Brazilian Beetle was only fitted 18
with a safety steering column in 1976 – nine years later than its German role Letter from Werner P. Schmidt to Rudolf
model. The management board of VW do Brasil lobbied the government to delay Leiding, November 4, 1973,
18
the introduction of new safety regulations for cars. in: UVW, Z 174, no. 576/1.

Further advantages for VW derived from the classless brand image and German 19
origin of the Beetle, which in Brazil was nicknamed Fusca. As owning a car was Regarding the composition of the manage­
a mark of distinction in Brazilian society all the way through to the 1980s, the ment board in the 1960s,
Beetle’s lack of branding prestige was only an issue for the small percentage of in: UVW, Z 1053, no. 105/1.
society forming the upper middle and upper classes. VW’s German origin proved
beneficial to its brand image in Brazil, as the negative stereotyping of the “gringo” 20
was directed primarily against the economically and politically (over-)powerful There are numerous examples highlighting
USA and Americans in general, but not against Germany and German businesses. the careers of German-Brazilians with
In view of the positive associations of German products with solidity and quality, VW do Brasil to be found in features cover-
the German origin of the Fusca and of other models from VW do Brasil was ing service anniversaries of senior staff in
advantageous in terms of image. the company newspaper “Familia”.

When founding VW do Brasil in 1953, VW had allotted the Brazilian Monteiro- 21

Aranha group a 20% minority share-holding. The benefit of involving the Some copies of the minutes of manage-
influential Aranha and Monteiro industrialist families at the time, in addition ment board meetings are held in the
to the boost they provided to VW’s still meagre capital coverage, derived from Volkswagen Aktiengesellschaft archives in
their network of relationships with the key stakeholders in Brazilian industry, Wolfsburg. The archives of VW do Brasil
government ministries, and the political elite. Since their holding was below the contain no minutes of management board
25% blocking threshold, the minority shareholders were unable to block any meetings, because they were destroyed
decisions made, unless they related to capital increases. on expiration of their statutory retention
periods; interview with Jacy Mendonça,
Through to the 1980s, all the posts on the management board of VW do Brasil March 29, 2017 (Mendonça was a member
except human resources and legal affairs were held by German directors seconded of the management board of VW do Brasil
from the home country, most of whom had not lived in Brazil before.19 German responsible for the human resources port-
executives from Wolfsburg were also in the majority at the senior management folio from 1981 onwards).
level below the board. Although seconded German executives and specialists
represented just 0.2% of the total workforce (70 out of 35,000) in the 1970s,
many key positions were in German hands. Ethnic-German Brazilians and
first-generation German-speaking immigrants assumed the roles of engineers
and foremen in production and senior administrative functions, passing on

14
 F R O M T H E F O U N D I N G O F V W D O B R A S I L T O T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

22 the management’s instructions to the Brazilian workers by virtue of their

UVW, Z 1053, no. 105/1. bilingual skills and local knowledge.20 Based on the majority of Germans on the
management board, German remained the predominant language at senior
23 management level until the cooperation of VW do Brasil with Ford to create
State archives of North Rhine-Westphalia, Autolatina in 1987. Board meetings were conducted and minuted in German.21
denazification record of Friedrich Wilhelm
Schultz-Wenk (read in 2016 by Dr. Manfred Since the legal affairs portfolio demanded comprehensive knowledge of Brazilian
Grieger). law, and the human resources portfolio needed to be cognizant of the Brazilian
labour market as well as the complex Brazilian employment laws, the posts on the
24 management board were filled by a representative of the Monteiro-Aranha group
Wolfgang Sauer, “O homem Volkswagen, (Dr. Ignacio Barros Barreto) and a Brazilian executive appointed by VW.22 From
50 anos de Brasil”, São Paulo 2012, p. 153. 1954 to 1969, VW do Brasil was headed by the German director Friedrich Schultz-
The claim in the issue of “Stern” maga- Wenk (1914-1969). Schultz-Wenk joined the NSDAP (the Nazi Party) as a youth in
zine published on October 16, 1966 that 1931, served as a naval officer during the Second World War, and emigrated to
Schultz-Wenk had held a rank equivalent Brazil in 1949.23 Although Schultz-Wenk had chosen to live in Brazil, and became
to lieutenant colonel at the end of the war a Brazilian citizen, his knowledge of Portuguese was not good. In consultations
has little credibility, as he would have been with Brazilian officials, he needed the assistance of his German-Brazilian secretary
only a comparatively young 31 years old at Evelina Boelcke as an interpreter.24
the time.
Schultz-Wenk had known VW General Director Heinrich Nordhoff since the early
25 post-war years, and was on first-name terms with him. Their correspondence
Report by Schultz-Wenk to Nordhoff, shows that, despite his Brazilian citizenship, Schultz-Wenk saw himself
April 16, 1964, in: UVW, Z 174, no. 559/1. categorically as a German, and viewed his adopted home with a certain colonialist
sense of superiority. He expressed his negative view of Brazilians’ organisational
26 skills in a long letter he sent to Wolfsburg on April 16, 1964, seventeen days
Sauer, “O homem Volkswagen”, p. 154. after the military coup. Schultz-Wenk approvingly reported that “the coup was
exceptionally well prepared by Brazilian standards”.25 His well-intentioned
27 comments, such as when praising the learning capabilities of the often illiterate
Up until the start of the war, Schultz- migrants from the poor north-east of Brazil who found work at the plant as semi-
Wenck had been studying interior design skilled labourers, revealed a paternalistic, colonialist condescension.26
at the Kunstakademie [Academy of Arts]
in Hamburg. On this see: “VW-Tochter: Schultz-Wenk’s colonialist attitude was also reflected in the design of the executive
Erfolg mit Fusca” [VW subsidiary: success office suite, which the qualified interior design himself conceived.27 The hall for
with the Fusca], in: “Der Spiegel” 39/1966, business lunches, receptions and other official gatherings was designed in the
September 19, 1966. grand Brazilian colonial style, featuring heavy antique furniture and a large
French Gobelin tapestry, but bore the culturally, historically and geographically
28 inappropriate German name of “Rittersaal” [knights’ hall].28 The name “Rittersaal”
Sauer, “O homem Volkswagen”, pp. 151f. was intended to remind the other management board members and visitors of
the German character of the company, and emphasised the national pride of the
chairman.

15
3. VW do Brasil and the military coup
on March 31, 1964

← Production of the Volkswagen

Type 1, undated

17
V W D O B R A S I L A N D T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

Throughout the period of office of President João Goulart (1961-1964), Brazilian 29

consumers and businesses were faced with steadily rising inflation. The inflation Figures according to Baer, “Brazilian
rate in 1961 was 34.7%, but by 1962 it had risen to 50.1%, and by 1963 even as high Economy”, p. 410 (source: International
29
as 78.4%. For VW and other foreign corporations the rising inflation in itself was Monetary Fund – IMF).
not yet a matter of concern, as the country’s gross domestic product rose strongly
during 1961 and 1962, at rates of 8.6% and 6.6% respectively, and car sales were 30
increasing faster than production output. Thanks to the high level of demand Annual Report of VW do Brasil for
for new cars, and the lack of competition in the Beetle’s price class, the Brazilian 1963 submitted to Volkswagen Aktien­
car sector was a seller’s market which allowed cost increases to be passed on to gesellschaft (VW AG),
consumers without placing sales volumes at risk. in: UVW, Z 174, no. 559/1.

Brazilian business reacted to the announcement of extensive social reforms 31

and a political shift to the left by cutting capital investment and adopting an Minutes of the VW AG management board
increasingly negative attitude to Goulart. In 1963, for the first time since the end meeting on July 1, 1963.
of the war, Brazil’s economy stagnated, achieving growth of just 0.6%. In October
1963, electricity rationing was introduced as a result of inadequate investment in 32
power station capacity by the state-run power companies, forcing VW do Brasil to Law 4.131 dated September 3, 1962.
cut its production by 15%.30 The management board of VW AG suggested making In this regard refer to Felipe Pereira
up the shortfall in supply by building a company-owned power plant with a three ­Loureiro, “A aprovaçao da lei de limitaçao
31
megawatt capacity. de remessa de lucros no governo Goulart
e o ­empresariado nacional e estrangeiro
Goulart’s policy of expropriating undeveloped land along federal highways (estradas (1961-1964)”, in: Revista Brasileira de
federais) and railway lines from large-scale land-owners in return for government ­Historia 36 (2016), no. 71, pp. 155-171.
bonds, and the plan to lease the land to landless peasants and rural workers, was
aimed at implementing fundamental land reform in order to correct the major 33
social inequalities among the rural population. The politically influential large-scale Wellhöner, “Westdeutscher Fordismus”
land-owners saw this reform ideas as a dangerous threat to their social status. Based [West German Fordism], pp. 287f.
on the planned introduction of voting rights for the illiterate, and the legalisation of
the Brazilian Communist Party (Partido Comunista do Brasil – PCB), the agricultural 34
and industrial elites feared a political shift to the left at the next parliamentary Minutes of the VW AG management
elections. board meeting on November 14, 1963,
in: UVW, Z 373, no. 455/2.
In 1962, VW do Brasil and other Brazilian subsidiaries of foreign corporations were
forced to accept restrictions on annual profit transfers to their parent companies,
limiting them to 10% of invested capital.32 They had to deposit the equivalent of
50% of the value of all financial transfers abroad in Cruzeiros with the Banco do
Brasil, which severely impacted on their liquidity.33 By November 1963, VW do
Brasil had accrued an amount equivalent to DM 80 million in transfers that was
waiting for approval.34 The Brazilian government’s intention by this was not to
reduce companies’ dividend payments. The high levels of capital goods imports for

18
 V W D O B R A S I L A N D T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

35 industrial investments, and the associated increase in foreign debt, had resulted in
Brazil’s cumulative balance of payments substantial balance of payments deficits in the period from 1957 to 1963, and the
deficit from 1957 to 1963 was US$ 1,472 only means of mitigating them rapidly was by imposing restrictions on payments
million (Baer, “Brazilian Economy”, abroad.35
pp. 408f.).
When, in mid-March 1964, the Brazilian press published the government’s plans
36 to expropriate large parcels of land (above 500 hectares) at distances of up to
As claimed in the civil suit by trade 10 kilometres from federal highways, the heads of the Brazilian armed forces
unionists against VW do Brasil filed with began preparing a coup against the Goulart government. As government plans
the Commissioner for Human Rights at the to expropriate foreign refineries in favour of the state oil concern Petrobras
Justice Ministry of São Paulo state on were disclosed at the same time, the US government was alarmed. With the
September 22, 2015. The plaintiffs make knowledge and approval of President Lyndon B. Johnson, the US Department
reference to the unpublished masters of Defense instructed the US Navy to provide the Brazilian armed forces with
degree thesis by J.C.E. Silberfeld (“O Grupo logistical assistance in carrying out a military coup, with the aim of preventing the
Permanente de Mobilizaçao Industrial da expropriation of US oil companies in Brazil.
FIESP 1964-1967”, São Paulo 1984), who
had previously worked for the FIESP and The willingness of the US Navy to intervene proved irrelevant to the coup. The
gained access to some of the organisation’s coup’s organisers encountered no serious resistance either within the military
documents that were not in the public or in the Brazilian public at large. The attempted resistance of the government
domain. and its allied parties and trade unions very rapidly proved to be futile, and as a
result the coup plotters gained control over the country, without US assistance,
on March 31 and April 1, 1964. Owing to the short space of time spent preparing
the coup and the rapid success achieved by the military, it is highly unlikely that
the coup plotters received active logistical support from Brazilian companies. Just
four weeks after the coup, on April 30, 1964, the industrial association of São Paulo
state (FIESP), of which VW do Brasil was also a member, established a Permanent
Working Group for Industrial Mobilisation (Grupo Permanente de Mobilizaçao
Industrial – GPMI) as an instrument for industry to actively support the military
government.36 VW do Brasil provided no financial support to the coup plotters.

President Goulart and a number of his political allies escaped into exile on April
2nd in order to avoid arrest. In the early weeks following the coup, a mass “clean-
up operation” (Operaçao Limpeza) saw a total of 7,000 people being arrested.
Under pressure from the coup plotters, the Brazilian parliament was prevented
from appointing the house speaker to succeed Goulart as the constitution
stipulated. Enacting the Emergency Powers Act Number 1 (Ato Instituçional No. 1),
the coup plotters installed General Castelo Branco as President. Over the coming
months, the Emergency Powers Act served as a pseudo-legal basis for withdrawing
passive voting rights from the ministers in the Goulart government and their
supporters in parliament, and to initiate mass sackings of their supporters from
the public service and the military.

19
V W D O B R A S I L A N D T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

VW board member Friedrich Schultz-Wenk was in no way shocked at the coup. 37

In fact, he was decidedly positive; even euphoric. In a long letter to Nordhoff on Letter from Schultz-Wenk to Nordhoff, April
April  16, 1964, he made no secret of his opposition to the “distinct leftward swing 16, 1964; cf. report by Schultz-Wenk on the
of the Goulart government”. Schultz-Wenk explicitly welcomed the arrest of trade development of VW do Brasil in 1964,
union leaders, and of actual and alleged Communist sympathisers. He expressed in: UVW, Z 174, no. 559/1.
both the mood of Brazil’s business elite and his own pleasure at the coup by saying:
“I was astounded by the sincere joy with which the government’s fall was 38
welcomed”. He saw the appreciation of the Brazilian Cruzeiro against the Dollar Letter from Schultz-Wenk to Nordhoff,
and the 100% rise in the stock market as unmistakeable signs of business’s May 25, 1964, in: UVW, Z 174, no. 559/1.
justified confidence in the coup organisers’ policies.
39
Schultz-Wenk did not downplay the violent nature of the coup, and even justified Letter from Nordhoff to Schultz-Wenk,
it. His comment, “What is currently taking place is a hunt such as we did not even May 15, 1964, in: UVW, Z 174, no. 559/1
see back in 1933 in Germany”, is an expression less of horror than of respect for
the determined approach of the military in targeting left-wingers. His objection,
“Whether it’s all right can be questioned, because pressure does of course generate
counter-pressure”, was a criticism not of the use of force in itself, but a warning of
a potential and, in his view, impending left-wing uprising. Schultz-Wenk trusted
that the military government would reduce the high inflation rate by unpopular
measures and would impose rigid stability in its economic policy. While some
stability policies in the form of government wage controls and managed cuts
in real incomes were quite in keeping with business interests, he was willing to
accept the negative consequences of an anti-inflationary policy for VW do Brasil.
Increases in real-terms interest rates and restrictions on loan approvals by banks
were likely, but threatened to impede sales growth.37 Yet, as early as May 1964,
he was proclaiming in a letter his unreservedly positive expectations regarding
trends in sales revenues.38

Heinrich Nordhoff did not share Schultz-Wenk’s enthusiasm about the coup,
and warned his Brazilian representative against openly taking sides in favour of
the military government. Nordhoff’s argument was not based on a fundamental
rejection of the coup, but rather on concerns that VW do Brasil, as a foreign-owned
corporation, might be vulnerable if it got caught in the crossfire between the
coup organisers and their opponents. Consequently, he instructed Schultz-Wenk
“not to do anything which might result in too close links being formed with the
current government, including demonstratively announcing new investment
plans, which I think would be premature and inappropriate”. He noted that
the instability of the situation meant that any interference in Brazilian politics
would be “highly dangerous” for foreign companies.39 Nordhoff’s comment
regarding the “instability” of Brazilian politics can be interpreted as trivialising

20
 V W D O B R A S I L A N D T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

40 the coup. Considering his negative view as to the stability of Brazilian politics, the
Letter from VW AG (Novotny/Siebert) military coup appeared to him as an almost natural consequence of an unstable
to the German Federal Minister for democratic order.
Eco­nomic Cooperation, June 11, 1964,
in: UVW, Z 174, no. 479/1. Nordhoff’s initially cautious and neutral attitude to the coup was not shared by
all the senior management at VW AG. VW directors Novotny and Siebert, in the
Group Foreign Investments department, expected to see a more business-friendly
approach in Brazilian economic policy, and judged that “the political change in
Brazil has given grounds for hoping that fruitful collaboration with the country’s
authorities can be maintained. So we very much welcome the fact that, just in this
period of the restoration of a rational political order, German development aid
[for Brazil, C.K.] is beginning to flow”.40 VW AG’s hopes of German development
aid for Brazil were certainly not founded on altruistic considerations: VW had
proposed to the German Federal Minister for Economic Cooperation that VW do
Brasil should sell him non-transferable Cruzeiro assets to finance development
aid projects in return for hard, fully transferable Deutschmarks. Nordhoff and
the management in Wolfsburg could be confident that their cautious, though in
fact unreservedly positive, assessment of the coup organisers was in tune with
the German federal government’s view. Federal President Heinrich Lübke did not
cancel his state visit to Brazil despite the coup, and the visit went ahead in May
1964. VW would have had little interest in seeing the visit cancelled, as part of
Lübke’s trip included a prestigious visit to the VW plant in São Bernardo, where VW
do Brasil had organised a large-scale reception by the workforce. This was another
reason for Schultz-Wenk to paint the picture in Brazil in an almost unreservedly
positive light.

VW do Brasil was already one of Brazil’s biggest companies by 1964, and over the
coming years was to become its biggest foreign-owned business. The trend in VW
do Brasil’s market share across all four-wheel motor vehicle segments (passenger
cars, vans, trucks and buses) during the 1960s was as follows:

21
V W D O B R A S I L A N D T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

TABLE 1: VW DO BRASIL SHARES OF THE DOMESTIC MOTOR VEHICLE MARKET41 41

Shapiro, “Engines of growth”, p. 242.
Year Market share

1960 21.3 % 42
“Der Spiegel” 39/1966.
1961 32.5 %

1962 28.1 % 43

1963 33.7 % Minutes of the VW AG management

board meeting on May 18, 1965,
1964 36.2 %
in: UVW, Z 69, no. 719/2
1965 40.5 %

1966 42.4 %

1967 51.4 %

1968 55.4 %

1969 50.4 %

VW do Brasil’s prominent position as the country’s biggest car-maker gave the

company’s management considerable influence in economic policy matters
through its dealings with the government. When car sales briefly collapsed in 1965
as a result of the government’s rigid anti-inflationary monetary policy, Schultz-
Wenk intervened by successfully appealing to the Brazilian Economy Minister
(Ministro do Planejamento) Roberto Campos for a temporary cut in the high
level of sales tax on cars.42 In view of the government’s deflationary policies, in
May 1965 Nordhoff decided to cut back on capital investments for expansion of
capacity for the time being.43

However, from the perspective of VW do Brasil and VW AG the government’s

decision to ease restrictions on the transfer of profits, licences and consulting fees
to foreign parent companies was more important. Although foreign subsidiaries
were still subject to controls on transfers of profits and licence fees to their parent
companies abroad, until a change in the law in 1974 VW do Brasil was able to
transfer licence and consulting fees at the contractually agreed level to VW AG
in addition to dividends. VW do Brasil resolved the problem of non-transferable
profits by re-investing them in Brazil. It not only bought shares in Brazilian
companies, but also made loans in Cruzeiros to German-owned companies such
as Krupp do Brasil.

22
V W D O B R A S I L A N D T H E M I L I TA R Y C O U P O N M A R C H 3 1 , 1 9 6 4

23
4. Industrial relations at VW do Brasil
during the dictatorship

← Production of the Volkswagen

Transporter in Brazil, undated

25
I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

The following section examines the relationships between VW do Brasil as an 44

employer and its employees – generally termed ‘industrial relations’ for research Since, all the way through to the 1980s,
purposes. The first questions to be asked are whether the military coup had a women accounted for only five percent of
negative influence on the abilities of employees and their trade union to shape and the total workforce of VW do Brasil
share in decision-making, and how the behaviour of the company’s management (a much lower rate than at VW AG; cf.
towards its employees changed under the dictatorship.44 UVW, Z 1184, no. 355/1), for simplification
reasons only the male form is used here.
The origins of Brazilian employment law extend back to the period in office of This usage of the male form does of course
President Getúlio Vargas, who ruled Brazil as a dictator following a military coup include female employees.
45
in November 1937 until the end of the Second World War. Among the successes
of his regime were a minimum wage, set in 1943 on the basis of a scientifically 45
calculated basket of food, living, clothing, transport and health costs. Covering Hans-Joachim König, “Geschichte
all sectors of the economy, though at a very low level, it did establish a certain ­Brasiliens” [History of Brazil], Stuttgart
minimum standard of living. In Vargas’s first period of office as dictator (1937-1945), 2014, pp. 250-260.
the government introduced a Labour Code (Consolidaçao das Leis do Trabalho –
CLT) which, through 922 articles, enacted measures including a law guaranteeing 46
dismissed employees severance payments according to their length of service, Maria Helena Moreira Alves, “State and
which in its basic principles remains in force today. Through until 1966, employees Opposition in Military Brazil”, Austin 1985,
with more than one year’s service were entitled to a severance payment of one pp. 68f.
month’s wage per year of employment plus an additional month’s wage by way of
basic security support. Employees with at least 10 years’ service were entitled to 47
double the severance payment. They also enjoyed enhanced rights in the event of Moreira Alves, “State and Opposition”,
termination (stabilidade), and were extensively protected against dismissal except p. 85.
in cases of misconduct.46

The “New State” (Estado Novo) of the Vargas era was orientated to the authoritarian
form of government of the same name which existed in Portugal from 1931 to
1974 under Prime Ministers António de Oliveira Salazar and Marcelo Caetano. In
the industrial relations field, the Estado Novo created formally independent sector-
specific trade unions (sindicatos) at local level which were authorised to represent
employees in one industry at one location. Despite their right to negotiate pay
rates with local employers and freely elect their representatives, the trade unions
were in no sense autonomous. The Estado Novo, and the military dictatorship
established in 1964, utilised the formal right – though one not exploited by
democratic governments – to remove opposing trade union executive members
from office and to declare strikes generally illegal through emergency ordinances
or by the judgements of labour courts. As the trade unions were not allowed to
collect members’ dues themselves, they were dependent on government grants. The
Ministry of Labour collected obligatory trade union dues from employees through
companies’ social security contributions, and distributed the monies collected to
the local trade unions.47

26
 I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

48 There was no autonomy for employers and employees’ representatives to

Kenneth P. Erickson, “The Brazilian Corpo- negotiate collective pay agreements. The Brazilian Ministry of Labour directly
rative State and working-class politics”, oversaw pay levels through the regional labour courts. Collective pay agreements
Berkeley/Los Angeles 1977, pp. 153-174; between trade unions and employers only came into force once approved by the
Youssef Cohen, “The manipulation labour courts, and as such were instruments of government wage policy. The
of consent: The state and working-class objective of authoritarian corporatism in the Vargas era was to prevent social
consciousness in Brazil”, Pittsburgh 1989. conflict by state intervention. Despite repeated propaganda claims that the Estado
Novo was orientated to the common good, the arbitration role of the strong
49 state tended to favour the employers. Even in phases of economic boom and
Law 5.107 dated September 13, 1966 shortage of skilled staff – especially from 1964 onwards – the Ministry of Labour
(www.planalto.gov.br/ccivil_03/Leis/L5107. was focused more on maintaining purchasing power by mitigating inflation and
htm, accessed on May 19, 2017) less on productivity growth. In this way, the government obstructed a partial
redistribution of profits to the workforce in the interests of the companies. Pay
rises above productivity growth have been unwanted in government wage policy
since 1964.48

In September 1966, the government reduced the existing severance pay

entitlements. Whereas employees previously had legal rights in relations with
their employers, a state severance payment fund (Fundo de Garantia por Tempo
de Serviçio – FGTS) now took control of payments to dismissed and unemployed
workers. Employers were now obligated to pay eight percent of each employee’s
monthly wage to the severance payment fund, which ran an individual credit
balance account for each employee. After being dismissed, employees received
this amount together with the accrued interest by way of severance payment
– replacing the non-existent social security (unemployment insurance)
contribution.49

The new severance payment law was detrimental to employees in multiple ways.
Firstly, the severance payments were lower because the basic month had been
abolished. Secondly, the legal and financial obstacles to terminating long-standing
employees with 10 years’ service and more were eliminated without replacement.
Whereas employers had previously had to make the severance payments from
their own wage budgets, the obligation to provide compensation had now shifted
to the government fund, the FGTS. The government had thereby removed a
major cost risk for companies looking to implement mass redundancies. Even
long-standing employees with years of service were no longer protected against
dismissal by the high cost to their employers of severance payments.

27
I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

VW do Brasil welcomed the measures easing the termination of long-standing 50

employees, though at that time they were not yet significant in terms of personnel Minutes of the VW do Brasil management
policy. Since the São Bernardo do Campo plant had been in existence since 1959, board meeting on November 12, 1968,
it was not until the early 1970s that the first production staff began reaching in: UVW, Z 1053, no. 62/1.
their 10-year service anniversaries. Steadily rising production had also seen an
increase in employment, so that new recruitment far outweighed terminations. As 51
terminations no longer entailed additional cost, the new severance law brought VW do Brasil, 1977 Annual Report,
VW do Brasil considerable savings. Because the new employment law gave the in: UVW, Z 319, no. 1/8312.
employees the option to choose between the old and new severance payment
provisions, VW’s workforce had to agree to their rights being transferred to the 52
FGTS. In 1968, VW do Brasil offered its workers a 15.5% pay rise, brought forward Erickson, “Corporative State”, p. 158.
five months, to encourage them to waive their former rights on termination and
accept the less favourable new severance provisions.50 The new law governing 53
termination and severance payment rights saved VW do Brasil some of the cost Moreira Alves, “State and Opposition”,
of severance payments, and delivered an estimated cost benefit of seven million pp. 51f.; law 4.330 dated June 1, 1964
Deutschmarks a year. It allowed the management to sack longer-serving employees (www.planalto.gov.br/ccivil_03/leis/1950-
who had become more expensive, without incurring additional severance 1969/L4330.htmimpresSão.htm, accessed
payment costs, and replace them by new staff with the minimum accrued rights. May 19, 2017). The military government
subjected the constitutions of 1967 and
This renewal of the workforce at the expense of the workers primarily affected 1969 to an authoritarian revision which
unskilled and semi-skilled staff, who were easy to replace. Skilled workers with weakened the rights of parliament in
key in-demand qualifications were hard – or indeed impossible – to replace, owing favour of the government.
to the shortage of skilled staff in the booming industrial city of São Paulo, and
were better protected against a cost-saving workforce fluctuation policy. Longer-
serving skilled workers were no longer protected by employment law, but merely
by the shortage of staff. In 1977, almost 20% of VW do Brasil’s workforce had been
employed at the plant for more than 10 years.51

The corporatist elements in Brazilian employment law persisted even after the
restoration of parliamentary democracy, including trade union freedoms and
the right to strike, in 1945. Following the coup, the military-led government
dismissed numerous left-wing trade unionists, replacing them with employee
representatives loyal to it.52 The government’s so-called Strike Act (Lei de Greve) of
June 1, 1964 – which was in truth an anti-strike law – abolished the right to strike
as has been guaranteed in the formally still valid constitution of 1946.53 While
the 1964 Strike Act did not punish strikes in private companies and non-essential
businesses, it did declare strikes “of a political or social nature” fundamentally
illegal. It left it to the discretion of the Ministry of Labour to adjudge the legality of
labour disputes. As a deterrent, it stipulated prison sentences of six to 12 months
for strike leaders, with the sentence doubling in the event of repeat offences.

28
 I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

54 As opposed to the local trade unions in the industrial city of Osasco in São Paulo
Cohen, “Manipulation of Consent”, p. 45. state, the metalworkers’ unions in São Bernardo do Campo and the neighbouring
towns maintained peaceful industrial relations, with no strikes, through to 1977.
55 At VW do Brasil and the car plants in its vicinity there had not been any strikes
John Humphrey, “Capitalist control and or significant trade union organisation even prior to 1964. The organisational
workers’ struggle in the Brazilian auto weakness of the trade unions in the auto industry was down, not least, to their
industry”, Princeton 1982, pp. 147f. being depoliticised by the military government. Since there was no statutory
health insurance in Brazil, the workforce regarded the tame trade unions primarily
56 as welfare institutions in case of sickness and as providers of legal protection
VW do Brasil, 1982 Social Report, insurance – areas of responsibility into which they were constrained by the
in: UVW, Z 947, no. 308/1. government. A survey conducted in 1972 and 1973 among 560 Brazilian workers
found that only 39% trusted the trade unions, while 42% trusted their employers,
57 and 71% trusted the government.54 In 1975, a survey by a British sociologist
Figures according to Reinhard Doleschal, among workers at Ford revealed that the workforce had little confidence in the
“Automobilproduktion und Industrie­ ability of their trade union to enforce pay claims.55
arbeiter in Brasilien: Eine ­Untersuchung
über Volkswagen do Brasil und die inter- Since pay levels in the auto sector were the highest in Brazilian industry, jobs at
nationale Arbeitsteilung” [Automobile VW were sought-after. Many of the semi-skilled and unskilled assembly staff
production and industrial workers in Brazil: had not previously worked in industry, and were not familiar with the working
a study of Volkswagen do Brasil and the conditions, industrial relations and hierarchies of large industrial corporations.
international division of labour], 61% of the workforce had only attended four years of primary school, and so were
Saarbrücken 1987, p. 169. The percentages quite uneducated; some were still illiterate when recruited.56 The VW workforce
relate only to workers born in Brazil. was also distinctly heterogeneous in terms of regional origins. While the skilled
workers came mainly from the most heavily industrialised state of São Paulo,
some of the unskilled and semi-skilled staff were migrants from the poor north-
east of Brazil, and were not yet integrated into the community in São Bernardo.
In 1973, 64% of the total of 32,000 employees originated from São Paulo state and
19% from the north-east.57

The skilled workforce primarily comprised tool-makers, lathe operators, machine

fitters and electricians, who worked in the tool shop and the maintenance
department on an hourly rate basis rather than on a piece rate, had previous
experience of working in industry, and were better educated and trained. Thanks
to the strong growth in the VW do Brasil workforce during the 1960s and 70s,
the in-house community was in a continual state of change. Because of the large
numbers being recruited, many of the employees had not been working at the
plant long.

29
I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

58
TABLE 2: WORKFORCE NUMBERS AT VW DO BRASIL 58
Statistics from VW do Brasil on production
Year Number of Employees trends and other data from 1960 to 1972,

1960 7,294 in: UVW, Z 174, no. 576/1 (original in

Portuguese).
1962 9,343

1964 10,094 59

1966 13,108 Werner Würtele, “Auf dem Weg zu einer

“authentischen” Gewerkschaftsbewegung
1968 19,483
in Brasilien” [On the way to an ‘authentic’
1970 23,799 trade union movement in Brazil],

1972 28,045 Heidelberg 1982, pp. 247-253.

60
There is no evidence of strikes at VW do Brasil even during the comparatively “Stern”, October 16, 1966.
disputatious period of the Goulart government. Alongside the lack of a trade
union tradition and the high pay levels in the auto industry, an authoritarian 61
paternalism encouraged the meek passivity of VW’s workforce. VW do Brasil’s At the company-owned Cooperativa shop,
internal communications depicted its workforce as one big family, in which the food prices were three percent below the
management board played the role of the authoritarian but caring father. The in- prices of other coperatives, and eight per-
house newspaper during the 1960s and 70s bore the telling title Familia [Family], cent below supermarket prices (brochure:
symbolising the paternalistic approach of the company’s management.59 “VW in Brasilien” [VW in Brazil], in: UVW, Z
174, no. 1029/2) (undated, 1979).
As Brazilian employment law made no provision for works councils or other 83% of the workforce were members of
employee representation bodies, the management was not confronted by the Cooperativa.
demands from an organised workforce. In an interview with a journalist from
“Stern” magazine in 1966, Schultz-Wenk declared in an apodictic and authoritarian
manner: “I am my own trade union here”. PR manager João Corduan added: “There
are no strikes, and if anyone incites the workers to strike, he will be dismissed”.60
The workforce’s only form of co-determination was through statutory in-house
accident prevention committees, whose members were proposed by the union
and elected by the employees.

Voluntary social welfare benefits at an unusually high level by Brazilian standards,

a large, well-equipped sports and leisure club for employees and their families, a
large cooperative shop (Coopervolks) with discounted prices that turned over the
equivalent of DM 58 million a year (figure from 1978) and a substantial, highly
subsidised lunch encouraged the workers to bond with the company materially
and emotionally, and enhanced their loyalty to their employers.61 In relation to

30
 I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

62 other welfare benefits, such as the well-equipped company clinic, providing free
Würtele, “Gewerkschaftsbewegung” treatment for employees and their families, VW do Brasil had since 1975 been
[Trade union movement], pp. 254f.; utilising the option allowed by law to provide medical services to its workforce
VW do Brasil, 1982 Social Report. under its own control, or in cooperation with contracted hospitals and local
doctors, in return for rebates on its statutory social insurance contributions
63 (INPS).62 This high standard of medical care did, however, make VW do Brasil’s
Data on employees’ car ownership in employees dependent on the company-appointed doctors, who were restrictive in
the VW do Brasil 1981 Annual Report. providing sick notes for ill workers. Other voluntary social welfare facilities, such
as the efficient company bus network, with low-priced fares and schedules timed
64 to coincide with changes of shift, did indeed benefit the employees, but were also
VW do Brasil, 1982 Social Report, the factors that enabled the company to recruit so many staff from the São Paulo
in: UVW, Z 947, no. 308/1. area in the first place.

As only a minority 37% of the workforce had their own car (despite receiving
employee discounts), and the local public transport system did not have
sufficient capacity and did not run in line with shift times, VW do Brasil was
forced to provide this infrastructure service under its own control.63 Through its
large, well-equipped training centre, with capacity for 900 apprentices, VW do
Brasil played a key role in providing the vocational training which was normally
the responsibility of the government vocational training body SENAI (Serviçio
Nacional de Aprendizado Industria). As VW primarily trained apprentices to cover
its own continually rising demand for skilled staff and engineers, the cost of the
education and training facilities it provided was well worthwhile. By contrast, the
grants for employees’ children to attend higher education colleges introduced in
1979 (1979: DM 546,000; 1982: DM 1,370,000) were a genuine voluntary welfare
benefit. As higher education colleges in Brazil charged fees, VW do Brasil provided
many of its employees’ children with opportunities for social advancement. VW
do Brasil began funding cooperative housing construction for its employees’
families in 1979 – much later than its parent company.64 It appears to be no
coincidence, however, that VW do Brasil introduced these voluntary benefits in
1979. It was the first year in which Brazilian auto manufacturers were confronted
by trade union pay demands and weeks of strike action. The new benefits were
aimed at appeasing and moderating the increasingly self-confident auto workers.

At first glance, the emergency powers laws introduced in the early years of the
military regime had had little impact on industrial relations at VW do Brasil.
Thanks to the ban on strikes and government oversight of the trade unions, the
company’s management could be sure that the workforce would not try to exploit
the boom in the auto industry to make increased pay demands.

31
I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

After the first four years of the dictatorship, the management boards of VW do 65
Brasil and VW AG had every reason to be happy with the military government’s Baer, “Brazilian Economy”, pp. 405, 410.
economic policy. While, owing to the rigid anti-inflationary credit restrictions,
economic growth in the first two years of the dictatorship (3.4% in 1964 and 2.4% 66
in 1965) was still quite weak compared to Germany, in 1966 and 1967 Brazil’s Letter from Lotz to Brigadier General
economy picked up with growth rates of 6.7% and 4.2% respectively. In the same Edmundo de Macedo Soares, July 19, 1968,
period, the high inflation rate fell steadily from 90% to 26.5%, substantially in: UVW, Z 263, no. 353/2. Lotz had only
mitigating the problem of adapting prices to difficult-to-predict increases in joined the VW AG management board in
wages and costs.65 Following his visit to Brazil in June 1968, the new chairman of June 1967, and was appointed chairman in
the VW AG management board Kurt Lotz (1912-2005; in office from 1968 to 1971) April 1968 following the death of Heinrich
was very graceful in expressing his thanks to the Brazilian Minister for Industry Nordhoff.
and Commerce, Brigadier General Edmundo de Macedo Soares, who had received
him for talks in the capital Brasilia. Lotz commended the minister that “your 67
economic policy (...) has enabled private investment in Brazil to flourish, and has http://legis.senado.gov.br/legislacao/
strengthened our confidence (...) in being able to sustain the successful policies of ListaPublicacoes.action?id=194620
Volkswagen do Brasil”.66 (accessed May 24, 2017).

Whereas Nordhoff had recommended maintaining some distance to the

military regime immediately following the coup, his successor Lotz sought to
engage in dialogue with the Brazilian government shortly after taking office.
Lotz was not influenced by the proclamation of the Emergency Powers Act No.
5 (Ato Institucional No. 5) in December 1968,67 through which the military-led
government further restricted civil rights. Emergency Powers Act No. 5 allowed
the government not only to withdraw the parliamentary mandates of any
opposition members it disliked, but also abolished protections against arbitrary
arrest (habeas corpus) in relation to political acts, and empowered the government
to proclaim laws by decree. The political crimes stipulated by the Emergency
Powers Act No. 5 also included disturbing the economic and social order, whereby
the government legalised the arrest of opposition trade unionists and striking
workers by the police organs of state. The dictatorial character of Brazil’s military
regime was rendered self-evident and undeniable by the Emergency Powers Act
No. 5.

On his second and third trips to Brazil in March 1970 and July 1971, Lotz was even
each time granted a one-hour audience with Brazil’s President, Emílio Garrastazu
Médici (1905-1985), who as President from 1969 to 1974, and a leading figure in
the military regime, was the embodiment of Brazilian domestic politics and its
human rights violations. On his trip to Brazil in March 1970, through the good
offices of then VW do Brasil chairman Rudolf Leiding, Lotz was awarded the

32
 I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

68 honorary citizenship of the major industrial city of São Paulo by the governor of
Telex from Döding to Leiding, 24.01.1972, São Paulo state. Lotz accepted this prestigious honour, even though the German
in: UVW, Z 69, no. 346/2. press was repeatedly reporting on the increasing cases of the arrest and torture
of left-wing opponents to the regime. The planned and approved visit by his
69 successor Rudolf Leiding (1914-2003; in office from October 1971) to President
Lotz travelled to Brazil from July 4-7, 1970 Medici in February 1972 was cancelled solely because the President changed his
and from March 23-29,1971 (see UVW, schedule at short notice to fulfil another commitment.68 Leiding’s successor Toni
no. 69, no. 366/1) Leiding visited Brazil Schmücker (1921-1996), who was chairman of the management board from 1975
twice in 1973 alone (May 22-June 1 and to 1981, was also received by President Ernesto Geisel in 1976.
October 26-November 3; see UVW, no. 69,
no. 345/1). The talks between the respective chairmen and Presidents Medici and Geisel and
their industry and commerce and finance ministers cannot be reconstructed
70 as no minutes of them exist. As Lotz was accompanied on his visits to President
Career of Edmundo de Macedo Soares Medici by the government’s economic policy chief, Finance Minister Antônio
(1901-1989) documented in: “Dictionario Delfim Netto, it is likely that the talks primarily related to matters of tax, trade and
Historico Biografico Brasileiro pós 1930”, foreign exchange policy. While chairmen Lotz and Leiding reported back to their
Rio de Janeiro 2001. management board colleagues on the situation at VW do Brasil on their return,
including some appraisal of the state of the Brazilian economy, according to the
minutes of the board meetings the repression of civil rights was never addressed.
It is therefore highly unlikely that Lotz or his successor ever confronted the
representatives of the Brazilian regime with regard to human rights violations and
restrictions on employees’ rights.

Lotz and his successor Rudolf Leiding travelled to Brazil almost every year in
order to review the positive development of the company’s biggest international
subsidiary.69 They certainly did not visit the Brazilian Minister of Industry and
Commerce and the Finance Minister merely as a courtesy, but rather to keep
up-to-date on the basic line Brazilian economic policy was following. Economy
Minister from 1967 to 1969 Macedo Soares, for example, had attained his position
not solely because he was a member of the military elite, but also based on his
years of experience managing state-owned and private Brazilian industrial
companies. Following the coup, Macedo Soares became president of the São Paulo
state industrial confederation (FIESP) and the national confederation of industry
(CNI – Confederaçao Nacional da Indústria).70 Finance Minister Delfim Netto was
not a key player who was visited by every management board chairman on their
trips to Brazil solely because of his responsibility for international payments. The
economist Delfim Netto was rightly regarded as the conceptual and decision-
making brains behind Brazil’s economic policy.

33
I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

The management of VW do Brasil was likewise unsparing its praise for the military 71
government. At a meeting of the largely irrelevant supervisory board (Conselho Report by Dr. Fernando E. Lee at the
Consultativo) of VW do Brasil on September 22, 1969, in the presence of Lotz and meeting of the Conselho Consultativo on
several other members of the management board of VW AG its first vice-chairman September 22, 1969 in Wolfsburg,
Fernando E. Lee praised the policies of the military government with the words: in: UVW, Z 69, no. 259.
“We all realize too well, from past experiences, the importance of a stable political
situation in the building and strengthening of our economy”. He justified the 72
continued military dictatorship against the background of the kidnap of the US Interview in Süddeutsche Zeitung with
Ambassador to Brazil by left-wing guerrillas: “(...) as it was evident that a civilian Werner P. Schmidt, February 16, 1972,
could not, at this time, exert the necessary powers to cope with such a serious quoted according to Würtele, “Gewerk-
situation”.71 schaftsbewegung” [Trade union move-
ment], p. 334.
The chairman of the management board of VW do Brasil from 1971 to 1973
Werner P. Schmidt was confronted with the criticism of human rights violations 73
in an interview with the “Süddeutsche Zeitung” newspaper. Werner P. Schmidt did “Der Spiegel” 39/1972, September 18, 1972.
not deny that regime opponents were being tortured and murdered, but justified
the actions with the apologist claim that “you can’t make progress without being 74
tough. And progress is being made”.72 In a monthly report to Leiding, Schmidt Letter from Leiding to Hoffmann, October
condemned an article in the German magazine “Der Spiegel” on September 18, 29, 1973: “Tenho notado, em muitas
1972 which had sharply criticised the increasing social inequality in Brazil and the contactos con journalistas e personalidades
smug nationalistic propaganda of the military government as “an infamy”.73 na Alemanha e Europa, que muitos de-
sconhecem ainda o verdadeiro aspecto da
The chairmen of VW AG made no comment on the Brazilian military dictatorship vida e da mentalidade brasileira, e apenas
either in public speeches or in interviews with German mass media until the late muito lentamente e com muita paciencia
1970s. In a letter to Brazilian member of parliament Alberto Hoffmann, Rudolf e possivel difundir uma imagem mais pos-
Leiding made no secret of his disapproval of the increasingly critical reporting on itiva do Brasil”, in: UVW, Z 174, no. 577/1).
Brazil by German journalists, and committed to promoting a more positive image (Translation: I have noticed in the course of
of the country.74 Leiding’s unreservedly positive view of the political and social many contacts with journalists and leading
situation in Brazil was disclosed to the Brazilian public in a lengthy interview with personalities in Germany and elsewhere in
the journalist Gerardo Moser in October 1973. Deputy Hoffmann – a member of Europe that many people are not yet aware
the governing ARENA (Aliança Renovadora Nacional) party – quoted Leiding’s of the true nature of Brazilian life and the
interview in detail in a speech to parliament, justifying the government’s policies Brazilian mentality. It will take a long time
through the positive impressions of a top foreign business executive: and a lot of patience to disseminate a more
positive image of Brazil, in: UVW, Z 174, no.
“(Leiding): I am convinced that Brazil is politically the most stable country in Latin 577/1). Hoffmann was a member of the
America. The reason that one sometimes hears criticism of the regime here in Europe Brazilian federal parliament from 1959 to
is that people here do not have sufficient insight into the true situation in Brazil. 1963 and from 1967 to 1983.
My view is that this stability will provide the country with the necessary economic
foundations (...) It is essential that more and more people should be included in the
working process. This will result in many problems being resolved all by themselves.

34
 I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

75 Brazilians (...) are not envious people, and they are satisfied with their lot if they
Speech by Alberto Hoffmann to the Brazil- can always be certain that their living conditions might slowly but surely improve.
ian congress (federal parliament), October Brazilians are also willing to work, even if they hate doing heavy labour”.75
10, 1973, in: “Diaro do Congresso Nacional”,
October 10, 1973, p. 7109. Leiding trivialised the criticism of the human rights violations by the military
dictatorship with the apologist argument that other Latin American countries
76 which at that time were still democratically governed, such as Argentina, were
Letter from Leiding to Prof. Dr. Kurt Hansen much more politically and economically unstable – and so unattractive to foreign
(chairman of the management board of investors – because of their militant domestic political conflicts. He claimed that
Bayer AG), April 25, 1973, in: UVW, Z 69, no. the criticism of the supposedly one-sided reporting in German media had been
286/1. It could not be determined whether received negatively by the German public. His prejudicial statements regarding
this brochure was also sent out to multipli- the willingness of Brazilians to work constituted a national stereotype which –
ers such as journalists. despite its apparently positive characterisation – revealed a condescending and
colonialist attitude. The management board of VW AG countered public criticism
77 of the political situation in Brazil with a brochure portraying the development
On Geisel’s career refer to the Brazilian of the country, and the involvement of German companies, in a positive but
Web portal UOL (www.educacao.uol.com. substantially uncritical light. As the brochure was distributed only to shareholders
br/biografias/ernesto-geisel.htm, at the annual general meeting, its impact was limited.76
accessed May 24, 2017).
Leiding regularly received reports on economic and political trends in Brazil from
78 the respective chairmen of the local subsidiary. In a surviving report from August
Letter from Sauer to Leiding, August 24, 1973, Wolfgang Sauer (1930-2013; appointed chairman of the management
1973, in: UVW, Z 174, no. 577/1. board with effect from July 1, 1973) notified his superior at the parent company
of the upcoming handover of presidential office from General Médici to General
Ernesto Geisel (1907-1996).77 In contrast to his predecessors Leiding and Schmidt,
Sauer had already been living in Brazil since 1961, and had first-hand knowledge
of the country when he took over at VW do Brasil. The new chairman expected
that “General Geisel will certainly be pursuing the policies of the revolutionary
government, possibly even rather more intensively (...)”.78 Sauer’s neutral choice
of words permits no conclusion as to whether he approved of the continuation
of repressive domestic policies. His use of the term “revolutionary government”
was in keeping with official government terminology, which had imbued the 1964
coup with the implied positive attributes of a revolution. Indeed, the government
marked the date of the coup each year as “Revolution day”. Sauer’s language
implied no distancing of himself from the military dictatorship.

35
I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

The chairman of the management Board of VW do Brasil was to be proved right in

his appraisal of political developments in Brazil. The new President Geisel left the
infamous Emergency Powers Act No. 5 (Ato Institucional No. 5) in force until the
end of 1978. His first two years in office (March 15, 1974 to March 15, 1979) saw
two spectacular political murders, of opposition journalist Vladimir Herzog and
metalworkers’ trade unionist Manuel Fiel Filho, who died as a result of torture in
Political Police prisons.

36
I N D U S T R I A L R E L AT I O N S AT V W D O B R A S I L D U R I N G T H E D I C TAT O R S H I P

37
5. The development of VW do Brasil
during the Brazilian Economic Miracle
(1968-1974)

← “Beetle marriage“; body and chassis

being joined, 1975

39
TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

Contrary to the widespread Economic Dependency Theory regarding the unilateral 79

dependency of emerging economies on developed countries, the Brazilian state Decree No. 20/1972 issued by
was not in a position of weakness in relation to large multinational investors such the CDI on August 29, 1972,
as VW. There is no evidence that VW influenced Brazilian tax policy, or of unilateral in: UVW, Z 174, no. 576/1.
business-friendly reform of employment laws. As opposed to most national
economies in the neo-liberal era after 1990, Brazil in the 1960s, 70s and 80s 80
pursued a highly regulated protectionist foreign trade policy, and imposed strict BEFIEX: Beneficios Fiscais e Programas
controls on the international transfer of money and capital. Transfers of dividends Especiais de Exportaçao. Regarding the
and of licence and consulting fees required the approval of the Central Bank, launch of the BEFIEX programme refer to
which was authorised to restrict outflows of profits to corporate parents abroad the briefing by the VW AG Investments
as a means of managing the country’s balance of payments and foreign exchange department, May 7, 1973,
position. Licences for the duty-free import of capital goods such as machinery in: UVW, Z 69, no. 345/1.
were tied to submission of proof that there was no Brazilian manufacturer capable
of making the machinery in question. A decree issued in August 1972 by the state 81
Industrial Development Council (Conselho de Desenvolvimento Industrial – CDI) Report by Dr. Krüger from the VW AG Inter-
obliged auto manufacturers with operations in Brazil to achieve export revenues national Legal Affairs department on the
of US$ 40 million over the next 10 years as an initial target. That target was 1968 financial year, December 18, 1968,
increased to US$ 100 million by 197479. From 1972 onwards, the State Commission in: UVW, Z 69, no. 302.
for Tax Benefits and Export Programmes (Benefícios Fiscais a Programas Especiais
de Exportação -–BEFIEX)80 decided on the approval of duty remissions on imports 82
of manufacturing equipment and materials deemed key to increasing export Report by the VW AG International Legal
production. The threat of loss of tax breaks if the export plan was not fulfilled Affairs department on the 1969 financial
was linked to the promise that export success would be rewarded with export year, dated February 11, 1970,
subsidies. in: UVW, Z 69, no. 259/1.

Although the Brazilian Central Bank (Banco Central do Brasil) allowed VW do Brasil 83
to transfer dividends and consulting and licence fees with no major restrictions Briefing by the VW AG Investments
up until 1974, it was able to exert indirect control over the appropriation of profits department, undated (1973),
through Brazil’s foreign exchange laws. In December 1968, for example, the VW in: UVW, Z 69, no. 345/1.
AG International Legal Affairs department complained of the “intentionally or
unintentionally unclear commercial regulations” which gave the Brazilian Central 84
Bank and the ministries considerable scope for the exercise of discretion to the Telex from Werner P. Schmidt
disadvantage of foreign companies81. By its own assertion, the VW AG Legal Affairs to Leiding, February 2, 1973,
department was “more reliant on good relations with the Brazilian authorities in: UVW, Z 174, no. 576/1.
than in other countries”82. As the Brazilian government only allowed dividend
transfers up to an amount of 12% of the share capital, the possibility of excessive
dividend returns to the parent companies of subsidiaries in Brazil was ruled out.83

There was no legal entitlement to duty-free import of capital goods into Brazil,
even if the goods in question were not otherwise made in the country. VW do

40
 TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

85 Brasil required the approval of the Brazilian Finance Ministry for the duty-free
In 1973, for example, VW do Brasil applied import of used machinery from its parent company. It was to that end that the
to the government for an 8% price increase, chairman of VW do Brasil maintained their good relations with the Brazilian
while expecting to be allowed only Finance Minister Delfim Netto, who as the government’s economic policy chief
a 4% rise (report from Sauer to Leiding, had the last word in the issuing of import licences.84
August 24, 1973, in: UVW, Z 174, no. 577/1.
The Banco Central took several months to decide on VW do Brasil’s application to
86 transfer consulting and licence fees to Germany. Since the Brazilian Cruzeiro was
Situation report by VW do Brasil for the continually losing value owing to the still high inflation rate of 24% (on average
meeting of the Conselho Consultativo on from 1967 to 1969), the transfer date was key to the valuation in Deutschmarks. In
September 22, 1969, in: UVW, Z 69, no. 259. just one year, from January 1968 to January 1969, the Brazilian Cruzeiro lost 19%
of its value against the US Dollar and the Deutschmark. If the Banco Central set the
87 applicable date of the foreign currency allocation as the date of its approval rather
Report of the VW do Brasil sales than the date the application for transfer was submitted, Volkswagen AG’s income
organisation, February 28, 1973, from dividends, licence and consulting fees would be reduced.
in: UVW, Z 69, no. 345/1.
VW do Brasil did not have freedom in terms of its pricing either. The requirement
88 of government approval for price increases hindered VW do Brasil in maximising
According to Shapiro, “Engines of growth”, its sales revenues, but not in achieving high returns85. The Brazilian auto market
p. 174, the average return on sales in the remained a seller’s market up to the late 1970s. This enabled VW do Brasil to
Brazilian auto industry in 1968 was 2.9%. increase its sales by 28% in 1969, achieving a 65% share of the passenger car
market, though it could not fully exploit the potential for price increases86. The
89 high demand for cars allowed VW dealers to continue offering top-class terms. As
VW do Brasil 1971 Annual Report, dated dealers had to pay for new vehicles in advance, VW do Brasil was protected against
January 12,1972, in: UVW, Z 69, no. 346/2. the inflation risk in the period between the vehicle being shipped and being sold
to the customer.87
90
Minutes of the VW do Brasil management Government price controls did not prevent VW do Brasil from achieving
board meeting on March 27, 1973, in: UVW, exceptionally high returns during the period of the Brazilian Economic Miracle
Z 174, no. 576/1. The new VW do Brasil from 1968 to 1974, substantially outperforming the average returns in the
chairman Wolfgang Sauer (1930-2013) Brazilian auto industry88. The company’s return on sales before tax in 1971 was
reported to Leiding in a letter dated August 9.7% of net sales revenues – much higher than that of its parent company, whose
24, 1973 on difficulties in material procure- profits that year dropped sharply despite an economic boom.89 Where problems
ment (see UVW, Z 174, no. 577/1). Refer arose, they were on the production side rather than on the sales side. The minutes
also to the minutes of the VW do Brasil of a management board meeting in March 1973 noted problems in on-demand
management board meeting on August 1, delivery of raw materials, which were hindering increases in production.90
1973, in: ibid. The strict regulation of the Brazilian auto market also brought established
manufacturers such as VW major competitive advantages however. As imports
of machinery and other equipment initially impacted negatively on Brazil’s trade
balance, new foreign investors required approval for capital investments and

41
TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

production from the government. VW AG chairman Leiding urged the chairman of 91

VW do Brasil Sauer to oppose the approval of new competitors in discussions with Letter from Leiding to Sauer, August 14,
government representatives. He encouraged Sauer to exploit the government’s 1973, in: UVW, Z 174, no. 576/1.
enthusiasm for motorisation by persuading them through the Fordist argument
of low product prices based on the highest possible volumes from a small number 92
of auto manufacturers.91 Report by Sauer to Leiding, July 16, 1973,
in: UVW, Z 174, no. 576/1.
Brazil’s distinctly nationalistic and protectionist economic policy made it difficult
for new foreign investors to gain a foothold on the market, but it did favour the 93
established auto manufacturers. The new chairman of the management board of Briefing by the VW AG Investments
VW do Brasil Wolfgang Sauer, with his long-standing experience of Brazil, even department, May 7, 1973, in: UVW, Z 69,
expected the government to be sympathetic to VW in recognition of that fact that no. 345/1; minutes of the management
its actions as a manufacturer and investor were fully in keeping with the regime’s board meeting on August 21, 1973,
principles.92 Based on the incentives on offer, VW do Brasil showed itself very in: UVW, Z 69, no. 731/1.
willing to fulfil the government’s target of a billion US Dollars’ worth of exports
in the period from 1973 to 1982. While up to 1973 the protectionist national 94
auto markets in Latin America meant that VW do Brasil was only able to export Audit mandates for August 1972 and
passenger cars to Peru, it did supply vehicle components to VW of South Africa June 1973, in: minutes of the management
and, from 1974, shipped tens of thousand of engines and gearboxes a year to board meetings on August 31, 1972 and
93
Germany for the Passat. June 5, 1973, in: UVW, Z 69, no. 730/1;
draft resolution for the management board
In view of the substantial financial incentives for exporters in the form of export meeting on August 21, 1973,
premiums, the management board of the parent company agreed to VW do in: UVW, Z 1199, no. 167/2.
Brasil’s proposal to relocate some of the Group’s engine production away from
the Baunatal plant in Germany to Brazil. From 1974 onwards, the Passats sold on 95
the Mexican market no longer came as CKD kits from Wolfsburg, but from VW Internal memo from the Economics depart-
do Brasil.94 As the Brazilian government subsidised the export of a CKD Passat ment to the Investments department,
at 20% of the production price (DM 1,164), the entire VW Group profited from July 13, 1973, in: UVW, Z 1199, no. 167/2.
its export promotion policies. In 1973, Volkswagen AG billed an internal transfer
price of DM 5,724 for a CKD Passat made in Wolfsburg, whereas the CKD Passat
from Brazil cost just DM 4,475 after deduction of the export subsidy. As the auto
industry in Germany was still booming in 1973, and there was a shortage of semi-
skilled workers on the German labour market, the VW AG management board
was unconcerned about the personnel policy implications of making 243 staff in
Wolfsburg redundant.95

The continually rising production, and the associated steady increase in the
workforce, generated economic growth and higher employment, and helped the
government achieve its economic development goals. As the biggest privately
owned industrial concern in Brazil, and the country’s fifth largest company, VW

42
 TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

96 do Brasil was a key player in the Economic Miracle which saw Brazil’s economy
Data on the position of VW within the grow by an average 10% a year between 1967 and 197396. The phrase “Brazilian
Brazilian economy according to “Brazilian Economic Miracle” (milagre econômico brasileiro), referring to the seven years of
Trends” 1973 (as of 1972). strong growth prior to the first oil price crisis (1967-1973), has – like the German
word “Wirtschaftswunder”, with the same meaning of “economic miracle”
97 – become an established part of the terminology in the study of history and
Refer to the explanation of the term on the economics, and is also used in popular portrayals of Brazilian history.97
website of the Fundaçao Getulio Vargas,
Brazil’s largest and most well-respected The shortage of qualified staff during the boom did not result in pressures for pay
economic research institute (http://www. rises in the auto industry because of the government wage controls. For example,
fgv.br/cpdoc/acervo/dicionarios/verbete- the Ministry of Labour and the labour courts stipulated a pay rise of just 18% for
tematico/milagre-economico-brasileiro, 1973. Despite the economic boom, pay rises remained one percent below the real
accessed May 24, 2017). inflation rate in 1972, and in 1973 their rate of rise was even to fall 4.7% below
inflation. The VWB chairman from April 1971 to June 1973, Dr. Werner P. Schmidt,
98 reported to VW AG chairman Leiding on doubts among the Brazilian public about
Report by Werner P. Schmidt to Leiding, the government’s inflation figures.98 As Schmidt had been in charge of VW do
March 29, 1973, in: UVW, Z 174, no. 576/1. Brasil for only two years, and spoke little or no Portuguese,99 the information
indicating that inflation was perceived to in fact be higher originated from his
99 Brazilian staff. It was subsequently to be proved that inflation was not only
According to the report by the chairman’s perceived as higher, but was indeed measurably higher. The corrected inflation
then secretary, in: “Sauer, O homem rate published in 1975 by the trade union economic and social research institute
Volkswagen”. DIEESE confirmed the suspicion that the inflation index had been manipulated.
From 1965 to 1968, and from 1972 to 1974, the official inflation figures, that
100 served as the decision-making basis for pay rises, were lower than the actual rise
Humphrey, “Brazilian Auto Industry”, in the cost of living.100
pp. 40-44.
The management of VW do Brasil had predicted a higher inflation rate in February
101 1973, and had costed-in a pay rise of 21%. VW AG chairman Leiding began to
Telex from Leiding to Werner P. Schmidt, question whether VW do Brasil was in fact “overdoing it” in reducing its personnel
February 20, 1973, costs, and failing to pay its employees appropriately despite the very healthy state
in: UVW, Z 174, no. 576/1. of the business.101 He expressed concerns about the VW do Brasil management
board’s plans to postpone upgrading employees to the next pay scale by three
102 months, to delay implementing the 1% performance bonus until the second half
Minutes of the VW do Brasil management of 1973, and to apply “the most stringent criteria” when re-evaluating posts.102
board meeting on February 1, 1973, Leiding was well acquainted with the situation at VW do Brasil from his own
in: UVW, Z 174, no. 576/1. experience. He had worked for VW from 1945 to 1965, and from 1965 to 1968
for what was then Auto Union GmbH, had headed VW do Brasil from 1969 to
1971, and was aware of the striking contrast between the collaborative industrial
relations at VW and Audi and the authoritarian paternalism of VW do Brasil.

43
TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

While VW AG accepted above-inflation pay rises and enabled its employees to 103
share in the benefits of productivity improvements through increases in real pay Statistics from VW do Brasil on trend in
rates, VW do Brasil held firm to its rigid pay policy. It exploited the government’s production 1960-1972, in: Internal memo
pro-business wage policy to generate higher profits at the expense of its from the Economics department to the
employees. VW do Brasil’s productivity rose much faster than the average pay of Investments department, July 13, 1973,
its employees: in: UVW, Z 1199, no. 167/2. The produc-
tivity figures were calculated from the
TABLE 3: PRODUCTIVITY TREND 1960-1972103 number of vehicles produced per employee
per year. This figure is neutral in terms of
Year Productivity inflation, as it relates to a material variable

1960 100 rather than a monetary variable, but does

not reflect inflation-adjusted falls in selling
1966 203
prices. Applying monetary variables, the
1968 222 rise in productivity would be less, even

1970 274 though the average value per vehicle sold

was on an upward trend as a result of
1972 344
the change in the product range and the
production of more expensive models (such
Average annual rise in productivity: 10.9% as the VW 1600).

104
TABLE 4: TREND IN AVERAGE PAY RATES 1960-1972 (INFLATION-ADJUSTED)104 Statistics from VW do Brasil on trend in
­production 1960-1972, in response to a
Year Average pay rates query from the General Works Council of

1960 100 VW AG to VW do Brasil, June 30,1978,

in: Appendices, UVW, Z 947, no. 362/1.
1966 126

1968 138 105

1970 158 Minutes of the VW do Brasil management

board meeting on February 28, 1969,
1972 180
in: UVW, Z 1053, no. 62/1

Average annual real increase in pay: 5.0%

44
 TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

106 These figures show that VW do Brasil did not allow its employees to share
Humphrey, “Brazilian Auto Industry”, p. 53. appropriately in the advances in productivity being made, and did not really
However, the median figure (above which enable them to profit from their improving performance. The enormous rise
50% of employees earned more, below in productivity was achieved not only by continually expanding production
which 50% of employees earned less) (economies of scale) and fitting out the plant with state-of-the-art machinery from
was just $240, owing to the distortion by Germany. As there were no Works Councils in Brazil, the plant management was
some particularly well-paid salaried and able to shorten the set production times without the workers having any formal
skilled staff. means of objection, and so improve productivity without increasing capital
investment.105 Because the auto industry’s high productivity levels meant that it
107 was able to pay significantly higher wages than the average in Brazilian industry,
Regarding the VW plant in Braunschweig VW do Brasil did not have to worry about losing qualified staff to other sectors.
see Ulrike Gutzmann/Markus Lupa, “Vom The average monthly pay in the auto industry in its main city of São Bernardo in
‘Vorwerk’ zum FahrWerk: Eine Standort- March 1976 was 2,870 Cruzeiros – equivalent to US$ 300.106
geschichte des Volkswagen Werks Braun-
schweig” [From the ‘Vorwerk’ to a full-scale It is not possible to compare productivity rates (measured in vehicles produced
plant: a history of the Volkswagen plant in per employee per year) directly with the parent plant in Wolfsburg, because of the
Braunschweig], Wolfsburg 2008. differing production depth. Whereas the plant in São Bernardo do Campo made
all its own vehicle components, in the 1960s the VW parent plant in Wolfsburg
108 was already integrated into a multi-centre manufacturing network. Relatively
Data on dividend trends from 1961 to labour-intensive production processes, such as the fabrication of front axles,
1972, in: UVW, Z 69, no. 345/1. steering columns and gearboxes, had been outsourced to the component plants at
Braunschweig and Baunatal since the mid-1960s.107
109
Minutes of a meeting of the VW do Brasil One might object to criticism of the divergence between productivity and real pay
management board with Leiding, October rates by claiming that an annual dividend of 10 to 12% of share capital was not
30, 1973, in: UVW, Z 174, no. 577/1. excessively high.108 Viewing the dividend payments in isolation, however, masks
the high levels of retained earnings by which VW do Brasil financed a major part of
110 its capital investments. As the Central Bank only allowed a 12% dividend transfer,
Report by the VW AG International Invest- VW do Brasil’s dividend payments remained substantially below its actual
ments department, June 18, 1979, earning power. The high levels of retained earnings were used for self-financing.
in: UVW, Z 1184, no. 355/1. As opposed to VW AG, VW do Brasil managed to maintain unusually low levels
of long-term debt through until the late 1970s, financing its capital investment
programmes largely from its own funds.109 Compared to its competitors on the
Brazilian market, VW do Brasil was characterised by capital-saving stock-holding
and efficient claims management, by which it cut the opportunity cost of lost
interest on capital.110

45
TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

TABLE 5: CASH FLOW (AS % OF INVESTMENT) 1968-1975111 111

Statistics from the VW AG International
Year Cash Flow Investments department, undated,

1968 93.1 % in: UVW, Z 587, no. 6/229.

1969 88.0 %
112
1970 163.3 % Figures according to Ibid.

1971 84.0 %
113
1972 111.3 %
Ibid.
1973 66.5 %

1974 37.8 % 114

Minutes of the management board
1975 80.6 %
meeting of VW AG on January 15, 1974,
in: UVW, Z 1133, no. 277/5); also letter
Average 1968-1975: 84.3% from Schömers to Thomée, October 19,
1973. in: UVW, Z 1199, no. 167/2.
Because VW do Brasil’s liabilities were largely limited to short-term supplier
payables, its expenditure on outside capital interest (1968 to 1975 cumulatively: 115
112
DM 165.0 million) was correspondingly low. With a debt ratio of just 3.5%, VW Briefing by the VW AG Investments
do Brasil was almost entirely unreliant on external sources of finance.113 department, April 25, 1973,
in: UVW, Z 69, no. 345/1.
VW do Brasil did not only transfer its surpluses in the form of dividends. Up to and
including 1975, the Brazilian Central Bank also approved the transfer of licence
fees and flat-rate consulting fees.114 The Central Bank only rescinded its permission
to transfer licence and consulting fees when Brazil’s balance of payments turned
negative owing to the deterioration in terms of trade (the ratio of export prices to
import prices) following rises in oil prices, and it became necessary to reduce the
outflow of money abroad. For example, in 1972 and 1973 VW do Brasil transferred
DM 17.9 million and DM 17.2 million respectively to its parent company in the
form of licence and consulting fees, thereby improving the Group’s cash flow.115
As the Central Bank partially offset dividend payments against licence payments,
however, VW AG did not receive both sources of income in full.

46
 TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

116
116 TABLE 6: DIVIDEND PAYMENTS BY VW DO BRASIL 1961-1972
Summary (“Smart Book”) on the financial
results of VW do Brasil, May 10,1973 , Year Dividend payments
in: UVW, Z 69, no. 345/1. 1961-1966 10 % (all shares)

1967-1968 10 % preference shares, 6 % ordinary shares

117
Overview in UVW, Z 69, no. 345/1. 1969-1971 10 % (all shares)
The transfers include dividends and 1972 14 % preference shares, 10 % ordinary shares
consulting fees.

118 TABLE 7: TOTAL TRANSFERS BY VW DO BRASIL TO VW AG 1971-1973117

Overview of international investments I,
May 22, 1981, in: UVW, Z 1184, no. 361/2. Year Total transfers

1971 DM 35.8 mil.

119
1972 DM 45.3 mil.
Memo from Leiding to Finance Director
Dr. Friedrich Thomée, October 24, 1973, 1973 DM 54.3 mil.
in: UVW, Z 1199, no. 167/2. This was com-
mon practice as far back as the early 1960s,
during the expansion phase of the plant in From 1962 to 1980, VW AG received DM 594 million in dividends and licence
São Bernardo do Campo (Wellhöner, “Der and consulting fees from its Brazilian subsidiary – a yearly average of DM 31.3
Fall Volkswagen” [The Volkswagen case], million.118 It should be noted in this context that VW AG owned only 80% of VW
p. 260). do Brasil; 20% of the share capital was held by the Brazilian Monteiro Aranha
group. With share capital of DM 176 million (in 1972), annual dividend payments
to VW AG from VW do Brasil during the boom period of high earnings were very
substantial.

It was additionally possible to transfer surpluses out of Brazil by means of internal

supplies from VW AG to VW do Brasil. VW do Brasil regularly procured used
machinery and tools from VW AG which were no longer needed at the German
plants and had been replaced by new investments. These machines were largely,
or even completely, written off of VW AG’s balance sheet. VW AG sold them to its
Brazilian subsidiary at fair market value rather than at the lower carrying amount,
thereby generating additional income, and resulting in more money flowing
back to it.119 Conversely, this practice reduced the profits that VW do Brasil had to
declare to the Brazilian tax authorities. The following figures setting out the after-
tax earnings of VW do Brasil reveal what surpluses the company was generating in
the form of dividends and licence and consulting fees:

47
TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

120
TABLE 8: NET INCOME FROM INVESTMENT IN VW DO BRASIL 1968-1975 120
Consolidated group results, VW AG/
Year Net Income VW do Brasil (UVW, Z 587, no. 6/229).

1968 DM 75.9 mil.

121
1969 DM 72.7 mil.
Analysis by Investments Department I
1970 DM 93.8 mil. dated May 22, 1981 concerning the

1971 DM 122.9 mil. investment in VW do Brasil,

in: UVW, Z 1184, no. 361/2.
1972 DM 94.4 mil.

1973 DM 99.2 mil. 122

1974 DM 103.1 mil. Statistics from the VW AG

International Investments department I,
1975 DM 83.9 mil.
in: UVW, Z 587, no. 6/229.

Total 1968-1975: DM 746.9 mil.

The very high levels of income and the restricted transfer options made it possible
to divert major portions of surpluses into strengthening the company’s equity
base and the self-financing of capital investments. Although Volkswagen AG only
raised VW do Brasil’s share capital by a small amount through injections of capital
between 1968 and 1975, the company’s capital almost quadrupled. According to
an analysis by the Investments Department I at VW AG, the concern’s investment
in VW do Brasil had by 1981 self-generated 75% of its acquisition value through
the reinvestment of profits, consulting and licence fees.121

TABLE 9: ASSETS OF VW DO BRASIL 1968-1975122

Year Assets

1968 DM 359.1 mil.

1969 DM 470.6 mil.

1970 DM 568.4 mil.

1971 DM 692.1 mil.

1972 DM 854.4 mil.

1973 DM 1,007.5 mil.

1974 DM 1,240.2 mil.

1975 DM 1,348.8 mil.

48
 TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

123 From the Group’s perspective, VW do Brasil generated impressive returns in the
Ibid. years of the Brazilian Economic Miracle.

124 TABLE 10: RETURN ON INVESTMENT (ROI) OF VW DO BRASIL 1968 TO 1975123

Ibid. (figures as from 1968). Figures for
Year Return of investment
1958 to 1961 according to Wellhöner,
“Westdeutscher Fordismus” 1968 49.5 %
[West German Fordism], p. 290.
1969 33.6 %

1970 54.8 %

1971 47.5 %

1972 40.1 %

1973 27.5 %

1974 14.6 %

1975 14.2 %

124
TABLE 11: RETURN ON SALES OF VW DO BRASIL 1968-1975

Year Return of sales

1958 8.2 %

1959 6.5 %

1960 5.3 %

1961 3.6 %

1968 15.3 %

1969 12.2 %

1970 18.8 %

1971 17.0 %

1972 16.8 %

1973 13.1 %

1974 4.6 %

1975 3.1 %

49
TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

The end of the Brazilian Economic Miracle at the time of the first oil price crisis 125
(in 1974) and the consequences of the global recession were reflected in less Overview in the appendices to the minutes
impressive returns. Although Brazil’s economy continued to grow much faster of the management board meeting on
than its European counterparts – at 9.0% in 1974, and 5.2% in 1975 – rising September 8, 1981. The figures from 1976
inflation rates (1973: 22.7%; 1974: 34.8%; 1975: 33.9%) and significantly increased onwards are recorded in local currency
fuel prices meant that the rise in sales slowed. (Cruzeiros or DM as appropriate), but are
not comparable to the figures up to 1975.
Up to 1975 the return on sales was stated
TABLE 12: RETURN ON SALES OF VW DO BRASIL 1976-1979 before tax; in subsequent years after tax.
125
(IN BRACKETS: VW AG)
126
Year Return of sales Report by VW do Brasil to VW AG,

1976 2.7 % (4.6 %) October 24, 1973,

in: UVW, Z 174, no. 577/1.
1977 2.7 % (1.7 %)

1978 2.5 % (1.6 %) 127

1979 3.5 % (1.8 %) Minutes of the management board

meeting on November 6, 1973,
1980 -1.7 % (1.2 %)
in: UVW, Z 69, no. 731/1.

VW do Brasil was forced to revise its medium-term sales programme laid out
in October 1973 during the boom. Shortly before the start of the oil price crisis,
the management board had projected the euphoria of ongoing growth into the
future, forecasting an increase to 776,000 vehicles a year in 1978.126 The rise in
sales did not attain the highly optimistic expectations of 1973. In 1979, VW do
Brasil sold 525,000 passenger cars and vans, which was to represent the peak of its
production. The relatively mild slowing of the boom in the auto industry allowed
VW do Brasil to avoid making heavy investments in new models. While the
front-wheel drive, water-cooled Passat was additionally built in Brazil from 1974
onwards, the Group management board postponed the planned production of
the VW Polo in Brazil.127 During the 1970s VW do Brasil significantly increased its
expenditure in the development of its own models, and by the end of the decade
was employing around 1,000 well-paid staff in Research and Development. This –
alongside the reduced scope for price increases and the lower economies of scale
with a more diverse model portfolio – was a further reason for the lower, but still,
adequate, returns on sales.

50
TH E DEVELOPMENT OF VW DO BRASI L DU RI NG TH E BRAZI LIAN ECONOMIC MI RACLE (1968-1974)

The first oil price crisis, and the recession resulting primarily from it, had a
significant impact on car sales in Germany. In the crisis year 1974, VW AG suffered
a record loss of DM 800 million, and made a loss in 1975 too. By contrast, growth
at VW do Brasil was slower than before, but business was stable. By the end of the
1970s, VW do Brasil was still a reliable – if no longer quite as lucrative – source of
earnings for the Group. The era of substantial double-digit returns on sales had
ended for ever with the first oil price crisis.

51
6. VW do Brasil and the persecution
of political opponents of the
military regime

← Production of crankcases, 1975

53
V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

The imposition of the Emergency Powers Act No. 5 in December 1968 initiated 128
and legalised greater repression of political opponents of the dictatorship by the On this refer to Elio Gaspari, “A Ditadura
state security organs. In June 1969, the Brazilian Army, the Police of São Paulo Escancarada” [The open dictatorship],
state (Polícia Estadual) and the Federal Police (Polícia Federal) formed a special unit São Paulo 2002, pp. 62ff.
(Operaçao Bandeirante – OBAN) to combat armed and unarmed left-wing activists
in Brazil’s largest city São Paulo.

The OBAN was not solely reliant on funding from the organs of state in the
financing of its technical equipment. As early as 1968, the members of the São
Paulo state industrial confederation (Federação das Indústrias do Estado de
São Paulo – FIESP) agreed to provide the government with financial support in
combating political opponents.128 From the time of its founding, the OBAN used
vehicles from VW do Brasil and Ford to carry its officers on their missions and to
transport arrested persons to its interrogation centre at Rua Tomas Carvahal 1030
in a prosperous district of São Paulo. Many of those arrested were also tortured
in the course of their interrogation. The most prominent victim of torture by the
OBAN was the 23-year-old student and later President of Brazil Dilma Rousseff,
who was held for 22 days in January/February 1970.

As no official OBAN records remain, the question as to what material assistance

it was given by the auto industry generally, and by VW in particular, can only be
answered by witness statements from former OBAN officers. The former sergeant
Marival Chaves Dias do Canto told the “Journal do Brasil” newspaper in 1992 that
auto manufacturers had provided the OBAN with vehicles free of charge. In view of
the witness’s comparatively low rank, however, there is considerable uncertainty
as to whether he would have had knowledge of financial matters as part of his
duties, or whether his statement was founded on supposition or rumour. As
the FIESP industrial confederation actively supported the OBAN, and VW was a
leading member of the FIESP, it seems likely that VW do Brasil did provide material
assistance to the OBAN either directly (through the supply of vehicles) or indirectly
(through its FIESP membership fees).

The surviving records of the Political Police (Departamento Estadual de Ordem

Política e Social – DEOPS) for the period from 1969 contain evidence of a regular
exchange of information between VW do Brasil’s in-house Works Security
department (Departamento de Segurança Industrial) and the repressive organs
of the dictatorship. From 1969 onwards, the Works Security department was
headed by Brazilian Army officer Ademar Rudge, who bore the rank of major on
his recruitment. By the time he retired from working for VW do Brasil in 1991,
the Brazilian Army Reserve had promoted him to the rank of colonel (Coronel). It
was not unusual for VW to appoint an Army officer as head of its Works Security.

54
 V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

129 Rudge’s predecessor, who had been appointed even before the military coup, was
Würtele, “Gewerkschaftsbewegung” promoted to the rank of a reserve general during his time at VW. In 1973, there
[Trade union movement], p. 331. was one member of the Departamento de Segurança Industrial for every 79
employees,129 so it was able to keep the plant under almost complete surveillance.
130
José Casado, “Repressao no pátio do Unfortunately, the records of the DEOPS contain no documents indicating whether
fábrica”, in: “O Globo”, May 15, 2005. This the willingness of Works Security to provide information was based on a formal
article was based on DEOPS files which the written agreement. A meeting between the heads of the security departments of a
historian Antonio Luigi Negro had viewed number of major auto manufacturers (VW, General Motors and Chrysler) and tyre
when researching in the São Paulo state manufacturers (Goodyear, Firestone) with the head of the Political Police for the São
archives for his book “Linha de montagem” Bernardo do Campo region on November 11, 1969 saw the establishment of routine
(São Paulo 2004). collaboration on security matters.130 This included, from the very beginning, an
exchange of information on subversive activities of employees directed against the
131 military regime. In view of this understanding, and the regular communications
“Volkswagen vista por seus operarios” with the Political Police, the leadership of the Works Security department regarded
(undated, 1970), in: AESP, DEOPS inventory. it as a matter of course that they would inform the police and military of anti-
regime political acts by company employees. A newspaper printed by the illegal
132 Communist Party of Brazil (PCB) and smuggled into the plant claimed that officers
Arquivo Público do Estado de São Paulo” of the Political Police and of the country’s domestic intelligence service, the SNI
[São Paulo state archive, AESP), DEOPS (Serviçio Naçional), were also working for Works Security.131 As the Works Security
inventory, 50-D-007-1393. department was collaborating with the Political Police anyway, this would be at least
likely.
133
Report by Rudge to DEOPS, December 11, The first evidence of collaboration by the Works Security department with the
1969, in: AESP, DEOPS inventory, Police originates from June 16, 1969, when the Air Force Staff informed the
50-Z-030-0822. DEOPS that subversive flyers had been discovered at the plant.132 The flyers, which
the Air Force intelligence service ascribed to militant activists belonging to the
Communist Party of Brazil (PCB), called on the workers to strike for a 45% pay rise.
For reasons that cannot be determined, rather than informing the Political Police
of the matter, Works Security had informed the military, which then passed the
information on to the Police. In the following months, Works Security discovered
a hectographed flyer produced by opponents within the trade union organisation
titled “O Macaçao” [The boiler suit] which called on the workers to strike,
demanded a 50% pay rise, and criticised the government-controlled wage policy.

On December 11, 1969, the head of Works Security informed the Political Police
that his staff had found the illegal newspaper “O Ferramenta” [The tool] in toilets,
changing rooms and stairwells at the start of the early shift. The Works Security
department did not just uncover subversive activities. With no formal request
from the Political Police, it disclosed the names of four suspects.133

55
V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

The main suspect was electrician José Miguel, whom the VW personnel department 134
had already fired on December 5, 1969 for displaying the newspaper.134 Although José Miguel (b. August 17, 1943) had
Works Security could only prove that the other suspects – Genezio Floriano Alves, worked at VW since January 1969. Based
André Inamorato Pardo and Idalecio Custodio da Silva – had been in possession of on the information from Works Security,
the flyers rather than having distributed them, it placed them under surveillance the Personnel Department decided that
from then on. The Works Security department provided the Political Police with “in the interests of our business, this
a report on all four suspects, including photographs and information from their person should not be re-employed”.
personnel files.135 The information on Miguel was to help the Political Police break
up a grouping of the illegal Partido Comunista do Brasil (PCdoB), which had been 135
formed as a Maoist break-away movement from the Moscow-orientated PCB in Report by Segurança Publica on subversive
1962. The Police got on the trail of Miguel – whom they had previously known only flyers at VW, January 6, 1970, in: ibid.
by his code-name “Macedo” – through the interrogation of two fellow suspects.136
136
The records of the Political Police contain a number of illegal newspapers and Letter from the commander of Department
flyers which were distributed by members of small illegal Communist groups at 2 of the Second Army to the director of
the VW plant in 1970 and 1971 and passed on by the Works Security department DEOPS São Paulo, February 10, 1971, in:
to the Political Police. Their contents indicate that the authors had been provided AESP, DEOPS, 50-Z009-22905; statement
with insights into VW by workers at the plant, or were themselves company by Antonio Carlos Lopez Granado under
employees. In December 1970, for example, “Unidade Operaria” [Workers’ unity] interrogation by DEOPS, January 21, 1972,
reported on a big fire on the site which had gutted the paint shop in shed 13. in: AESP, DEOPS, 50-Z-9-16333; questioning
“Unidade Operaria” accused the plant management of having sent staff into the of José Miguel Macedo by the DOI/CODI.
burning shed in order to save combustible paints and solvents from the fire. It January 22, 1972,
claimed that only the intervention of the Fire Service stopped the management in: AESP, DEOPS, 50-Z-009-28071.
from continuing to place the lives of its workers at risk.137 “Unidade Operaria”
was in fact referring to a major fire which occurred on December 17, 1970. As 137
VW records contain no reports on the fire, and the legal press gave few details of “Unidade Operaria”, no. 20, December
casualties because of the country’s censorship laws, these allegations cannot be 1970, p. 2, in: AESP, DEOPS, 50-Z-030-0822.
verified.
138
The newspaper “Luta Operaria” [Workers’ struggle] published by the illegal “Luta Operaria”, no. 32, January 1971,
Communist Party of Brazil (PCB) likewise reported on the fire in its January 1971 in: AESP, DEOPS, 30-C-160-9914.
issue.138 It accused the mainstream press of glossing over the number of injured
(two) and dead (one),139 reported on the hushed-up death of a forklift truck driver 139
in an accident during clearance operations, and criticised the speed of work According to the report in the newspaper
following the fire as “indescribably high”. As the plant management was keen to “O Estado de São Paulo”, December 20,
make up for the lost production as quickly as possible in order to keep up with the 1970, in: UVW, Z 1053, no. 12/2.
high demand for cars, the third allegation at least appears entirely plausible. By
February 1971, and prior to the completion of the new building, daily production
had reached 750 vehicles – three quarters of the normal rate.

56
 V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

140 In April 1971, the Political Police discovered a flyer from the militant Communist
AESP, DEOPS, 30-C-160-9914. The veracity group ALN (Açao Libertadora Naçional) in the possession of VW worker Dimas
of this flyer could likewise not be verified. Antonio Casemiro. The group had split off from the Communist Party of Brazil
(PCB) in 1967, and in 1969/1970 had kidnapped the Ambassadors of the USA, West
141 Germany and Switzerland in order to force the release of imprisoned comrades.
AESP, DEOPS, 50-Z-318-3421. The flyer reported that, following the announcement of a major recruitment
drive, thousands of people seeking work had gathered at the VW factory gates.
142 After having waited for hours at the gates, it claimed, many of them had become
AESP, DEOPS, 50-Z-341-0610. impatient and angry, in response to which the attending police had broken the
crowd up using batons.140 It is possible – though not completely certain – that the
143 Political Police captured the VW worker Casemiro as a result of information from
Information from the Air Force Ministry the Works Security department.
to the DEOPS, July 21, 1971,
in: AESP, DEOPS, 50-D-7-1714. Back in 1970, Works Security had discovered a flyer from the PCB in a toilet in shed
1 accusing the head of the local metalworkers’ union of being “a plain-clothed
police officer”, and alleging that he was intending to split the metalworkers’
union by establishing a separate auto workers’ union.141 A PCB newspaper titled
“Volkswagen vista por seus operarios” [Volkswagen from its workers’ viewpoint]
discovered the same year published information on the working conditions at
VW which could only originate from company employees. The newspaper mainly
criticised the pay structure, whereby wage rises were restricted by government
constraints, and the fact that workers had received only a commemorative coin
to mark the one millionth car produced by VW do Brasil rather than a special
bonus.142 While the plant management celebrated the in-house leisure club (VW
Club) for the employees and their families, the PCB criticised its high membership
fees and the additional charges for special events such as the annual beer festival.
From the viewpoint of the Works Security department and the plant management,
the criticism of the company’s inadequate accident prevention measures were the
most serious. The newspaper criticised the failure to provide welders with safety
gloves, as well as other general failings in relation to accident prevention, and
reported on five fatal work accidents in the last six months.

In July 1971, the Air Force intelligence service – most likely by way of an informant
– gained possession of a PCB training document advising “How to establish the
party in a big company”.143 The “big company” was VW do Brasil. This training
document revealed that the PCB cell at the São Bernardo do Campo plant had been
launched in 1968 with four active members. As there was little mood of opposition
among the workers at VW and throughout the auto industry at that time because
of the high pay levels, Communist activists focused on agitating among more
highly qualified staff with greater political awareness. To their disappointment, the

57
V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

class consciousness of the, in some cases, virtually illiterate unskilled and semi- 144
skilled workers was much too underdeveloped for them to be mobilised politically. Confidential report by the DEOPS, July 21,
Although qualified specialists were in a minority, and thanks to their high levels of 1971; cf. the report of the SNI (Serviçio
pay formed part of Brazil’s middle class, their higher education made them appear Nacional de Informaçoes) on Communist
more receptive to Communist ideas. Despite their privileged position enjoying infiltration of trade unions, December 16,
greater job security, the qualified specialist staff were regarded by the Communists 1971, in: AESP, DEOPS, 50-D-7-1714.
not – as according to Lenin’s theory – as a materially corrupted worker aristocracy,
but rather as the potential avant-garde of the working class. 145
Report by DEOPS chief Lucio Vieira on the in-
The experience of the Communist activists was to reaffirm their expectations. By terrogation of Amauri Danhone on August 4,
1971, they had established an illegal party cell with 32 members including newly 1972; August 7, 1972, in: AESP, DEOPS, 30-
recruited specialist staff and salaried employees.144 The group had a typewriter C-1-22496. Danhone was also a candidate of
and a stencilling device, so they were able to print their own flyers and small the only legal opposition party MDB for the
newspapers, and distribute them secretly around the plant. The group was aware municipal council elections in Diadema.
that the Works Security department was monitoring subversive activities. It
benefited from the fact that one of its members – the quality inspector Amauri 146
Danhone – was able to move freely around the plant in his role as voluntary Anita Leocádia Prestes was born on
trade union secretary, whereas most production staff were restricted to their own November 27, 1936 in the women’s
specific work area. For security reasons, verbal propaganda was restricted to the prison at Barnimstrasse in Berlin, after
group’s members, who were aware of the risk of arrest and interrogation. As the the Brazilian government had extradited
group members risked lengthy interrogation and even torture if arrested, they her mother to the German Reich. Anita
introduced themselves only by their code-names.145 Because the plant premises Prestes was sent back to her grandparents
were under constant surveillance by Works Security, the group’s secret meetings in Brazil at the age of 14 months, but her
were always held away from the site. Amauri Danhone was a board member of the Jewish mother Olga Benario was murdered
local metalworkers’ union, so the group was able to use a room at the São Bernardo at Bernburg prison in 1942. In 1974, Anita
do Campo chemical workers’ union for its meetings. Prestes was sentenced in her absence to
four and a half years’ prison by a Brazilian
This training document told the Political Police that a Communist group existed at military court. Following her amnesty in
the VW plant. There is no evidence that the Political Police shared this knowledge September 1979, she returned to Brazil
with the Works Security department. Political Police officer Lucio Vieira did, and was made professor of history at
however, report to his superiors that there was close cooperation with Works the Federal University of Rio de Janeiro
Security in the course of the investigations into Communists at VW. The Works (Universidade Federal Rio de Janeiro).
Security department’s disclosure of the discovery of illegal flyers and newspapers
helped the Political Police to obtain information about Communist activities at 147
VW and to tighten the net in the search for suspects. In the Spring of 1972, for Bellentani (b. November 30, 1944; at
example, the Works Security department provided the Polícia Militar (Military VW since 1964) was the group secretary
Police) with information about its employees Lucio Bellentani and Amauri responsible for agitation and propaganda.
Danhone, who were standing as candidates in the elections to the board of the Personal details of the detainees in AESP,
local metalworkers’ union on behalf of the opposition Chapa Azul [Blue List] and DEOPS, 50-Z-009-26099, 50-Z-009-26092,
were suspected of being PCB activists. On request from the Political Police, Works 50-Z-009-26082 and 50-Z-009-26064.
Security provided data on 28 VW employees whom the Police were investigating.

58
 V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

148 The illegal cell at the São Bernardo do Campo plant was part of the PCB’s regional
See footnote 147. Torini (b. September 22, party organisation in the greater São Paulo area. The most prominent member
1941) had been with VW since 1964. of the regional party organisation was the chemical engineer Anita Leocádia
Prestes, daughter of the long-standing PCB chairman Luis Carlos Prestes (1898-
149 1990) and his German partner Olga Benario (1908-1942).146 Anita Leocádia Prestes
See footnote 147. Geraldo Castro del Pozo chaired the regional Communist Party organisation, and was mainly responsible
(b. August 9, 1943) had been with VW since for the political education of the membership. In that role, she gave a number of
1968. lectures to the party cell at VW. While Anita Prestes was able to leave Brazil in time,
emigrating to the Soviet Union, six members of the party cell were arrested by the
150 Police between July 29 and August 8, 1972.
See footnote 147. Plagge (b. February 5,
1939; at VW since 1960) was the group’s The first VW employee to be arrested – on July 29, 1972 – was the 40-year-old
political secretary. Amauri Danhone. On the same day, the Police arrested the tool-maker Lucio
Bellentani;147 on August 2 they arrested the tool-maker Antonio Torini;148 and
151 on August 8 the milling machine operator Geraldo Castro del Pozo,149 inspection
See footnote 147. Buschel (b. May 23, 1949) foreman Heinrich Plagge150 and secretary Annemarie Buschel.151 Following six
was the group’s treasurer. to seven weeks in police custody, under intensive interrogation at the Political
Police gaol in Rua Mauá in the centre of São Paulo, on September 19, 1972 they
152 were transferred to the Army interrogation centre (Destacamento de Operações
https://www.kooperation-brasilien.org/de/ de Informação – DOI; literally “special command for the procurement of
themen/menschenrechte-gesellschaft/ information”) and brought back to the Political Police gaol later the same day.
50-jahre-militaerputsch/1972-wurde-ich-
innerhalb-des-vw-gelaendes-verhaftet Lucio Bellentani testified before the Truth Commission of the city of São Paulo
(accessed May 30, 2017). The original on July 19, 2012 concerning his arrest on the VW plant premises and his brutal
transcript of his testimony can be found in: treatment by officers of the Political Police:152
Comissão Nacional da Verdade “Vladimir
Herzog”, Relatorio Final, São Paulo 2013,
pp. 48-51 (http://www.vereadornatalini. I was a member of the Brazilian Communist Party. I joined the party in September
com.br/PDF/relatorio_final_comissao_da_ 1964. My father was imprisoned during the dictatorship of Getúlio Vargas153 because
verdade.pdf). he was also a member of the Brazilian Communist Party. He was also a municipal
councillor at the time. I was very proud to join the party, as my father before me had
153 been involved in the struggle, and the struggle was still going on.
1937 to 1945.
At that time I was working at Volkswagen in São Bernardo, and that is where my
activism began. We started organising the party base in the São Bernardo do Campo
factory, and that had a pretty big resonance within the party. We were very well
organised at the plant. I was involved in 1970, for example, as one of the organisers of
the opposition group to the São Bernardo do Campo trade union leadership. That was
the first election in which Lula stood as a substitute candidate of the union. He was the
last on the election list at the time, and I was part of that opposition election group.

59
V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

It was in 1972 that I was imprisoned. In 1972 I was arrested on the VW site. I was 154
working, and two guys came up to me with a machine pistol, which they pushed in This figure is exaggerated. The PCB’s inter­­
my back, and immediately place me in handcuffs. That was about 11 o’clock at night. nal training document relating to the party
The torture started as soon as I entered the Volkswagen Works Security room: I was group at the VW plant cited 32 members.
beaten straight away; slapped and hit with fists. They wanted to know whether there
was anyone else involved at Volkswagen. The party base at Volkswagen comprised 155
about 250 people at the time.154 Gaol operated by the Political Police
(DEOPS, abbreviated here as DOPS) in Rua
They took me to prison; to the DOPS [torture centre].155 On that day I was only Mauá in the centre of São Paulo; today a
beaten for two hours or so, then they threw me in a cell, and it wasn’t until the next memorial to the victims of political perse-
day that I was collected by Commissar Acra’s squad. The next day, I was handed over cution under the military dictatorship.
to Commissar Fleury’s156 squad, who put me in a huge hall on the third floor of the
DOPS building. There was a desk and a chair in the middle. I was sat down there, 156
and for 15 minutes or so Fleury was totally silent, looking at me, with half a dozen Sérgio Fleury (1933-1979), a Political Police
torturers [standing] behind him. Then suddenly he said to me: Listen, do you know officer from 1968; an infamous torturer and
who was the waiter at the Last Supper? Well, even if you don’t know, you’re going to leader of a death-squad against left-wing
tell us here [anyway]. regime opponents.

That’s when it really started: ‘pau-de-arara’ [torture while bound and suspended 157
from poles]; on my head, my hands, my feet. They broke quite a few of their sticks; Army interrogation centre (DOI) in Rua
I lost lots of teeth. That went on for about another 45 days, because, well: they Tutoia, São Paulo.
knew that the party base at Volkswagen was big, but during those 45 days the only
ones there were the guy who had betrayed me, and me, and he did not know all the
organisation, because we were organised in small groups, and I was the only one
who knew everyone.

After 45 days, they took the guy who had betrayed me to the factory, and he walked
along, pointing out all of them that he knew. Even then, they only got 10 people.
Only 10 people were betrayed, arrested and tortured. Fortunately, I managed to stick
to the same story from the first moment right to the end, and that’s how it stayed.

At that time the situation was this: The comrades who had been tortured and
persecuted the most were those who were active in the guerrilla movement: the
urban guerrillas, the Araguaia guerrillas – the people involved in the armed struggle.
They were tortured the most.

After four months at the DOPS, I was taken to the OBAN [torture centre].157 I got
there, and the Captain who was there – I don’t know who he was, he was a dark guy
– came up to me, looked at me, and untied me. He was furious, because – after four

60
 V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

158 months – what else could you want of a guy like me? There’s nothing more you can
Luis Carlos Prestes and Anita Leocádia do with him; and everything they had done at the beginning was worthless after
Prestes had escaped to the Soviet Union, four months. So they sent us back to the DOPS.
and were prosecuted and sentenced in
their absence. The night before they were supposed to be taking me back to gaol, at one o’clock
in the morning, they came into my cell and took me to the third floor. One came
159 then with a coil of rope, a few machine pistols and handcuffs, and said: Today we’re
Statement by Lucio Bellentani, October really going to make mincemeat out of you. I thought: this is it. I was the only one
16, 2014, in: Civil suit by trade unionists there. They grabbed me, and wanted to know where a young guy lived who worked
against VW do Brasil, September 22, 2015, at Mercedes in São Bernardo do Campo.
pp. 30f.
Back then, in 1972, around the Mercedes site was just barren land; there was
nothing; there was just Mercedes. They took me there, my hands cuffed behind my
back, placed the rope around my neck, tied the noose and pulled it tight, walked
around me, dragged me in circles across the ground, and wanted to know where the
guy’s house was. I stood up, and they let off a burst of machine gun fire, but they
were blanks, not live bullets. Then they put me back in the car, and one of them came
and said: Look, the guys over there are busy chatting. Take your chance and run. I
said: If you want to murder me, kill me here in the car; I’m not going to run away.
Then they put the handcuffs back on me and took me back to the DOPS.

To my surprise, the next day – after having spent six months at the DOPS – I was
taken to Tiradentes prison. That’s where I got to know Martinelli. He took me in, I
was placed immediately in his cell, he greeted me, and we were there together for
a time. I waited a year for my trial, and when the verdict was being issued, I found
that my co-accused were Luiz Carlos Prestes, and Anita Leocádia Prestes.158 She had
supported us back then, and had even lived in our house. The verdict was issued, but
we were all found not guilty due to lack of evidence. I was released.

The testimony of the witness and victim of the dictatorship’s persecution Lucio
Bellentani also incriminates the VW Works Security department. While Works
Security could not have prevented an arrest on the plant premises, it could have
forbidden the abuse that occurred in its offices by exercising domiciliary rights.
Bellentani even stated in an interview in 2014 that VW Security chief Ademar
Rudge had been present at his arrest, and had obviously been notified of it in
advance by the Political Police.159

61
V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

The question as to why the Police only arrested six of the total of 32 PCB members 160
must remain unanswered. Despite his severe abuse at the hands of the Political AESP, DEOPS, 50-Z-009-26088
Police, Bellentani remained steadfastly silent. The other detainees likewise only and 30-C-1-22496.
revealed information relating to group members the Police had already arrested.
In view of its conspiratorial intent, the illegal party grouping had not kept a 161
membership list by which the Police could have tracked down all the members. Report by the DEOPS on the activities
The Police did, however, find a list of 100 names of VW employees who had of the PCB at VW do Brasil. September 12,
donated money to the opposition trade union list’s election campaign.160 Contrary 1972, in: AESP, DEOPS, 30-C-1-22496.
to its assessment, the Political Police had not fully rooted out the Communist cell
at VW, but by arresting its leaders had rendered it incapable of acting.161 162
This refers to the arrest of an opposition
The management board of VW do Brasil was notified of the arrests by Works member of parliament in São Paulo state
Security. In a detailed nine-page report on the political and economic situation who, according to Werner P. Schmidt,
in Brazil, chairman of the management board Werner P. Schmidt also advised his was likewise suspected of “Communist
German superior Rudolf Leiding of them. By his choice of words: “Evidently linked agitation”.
to that162 also is the arrest of at least five employees of VW do Brasil who have been
proven to have been participating in subversive (Communist) activities”163 he 163
concealed the involvement of the Works Security department, and conveyed the Letter from Werner P. Schmidt
impression that VW do Brasil had not been party to the arrests. to Leiding, September 26, 1972,
in: UVW, Z 174, no. 575/1.
After periods of between six weeks and several months in gaol, the detainees were
released from remand and prosecuted before a military court. While Buschel, 164
Danhone, Castro del Pozo and Torini were freed after seven weeks’ imprisonment Personnel files of Lucio Bellentani, Amauri
by the end of September 1972, Plagge was not released from Tiradentes prison Danhone, Geraldo Castro del Pozo, Heinrich
until some time between the end of October and mid-December 1972. Because of Plagge and Antonio Torini, in: VW do Brasil,
his steadfast silence, Bellentani was the only member of the group who remained Personnel department registry. Annemarie
imprisoned without charge, for a period of 11 months, until June 27, 1973. Buschel, whose personnel file was not
Immediately after being released from prison, Bellentani, Danhone, Castro del viewed, was most likely also dismissed.
Pozo, Plagge and Torini were dismissed by VW. In all the cases, the Works Security
department demanded that the Personnel department fire them for being
“untrustworthy”.164

Despite the military court being forced to find the accused not guilty of actively
supporting the Communist Party due to lack of evidence, the military prosecutor’s
office lodged an appeal against the verdict. All the accused had to attend an appeal
hearing before the Federal Supreme Court in August 1974, and on August 27 were
sentenced to two years’ imprisonment. Lucio Bellentani, Annemarie Buschel,
Amauri Danhone, Geraldo Castro del Pozo, Heinrich Plagge and Antonio Torini
began their prison sentences in September 1974. As Bellentani had already spent

62
 V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

165 11 months in prison in 1972/73, he was released after eight months. The other
Letter from the São Paulo military court, prisoners were freed after 13 months at the end of October 1975. Their remaining
September 2, 1974, in: AESP, DEOPS; sentences were suspended.165 VW do Brasil did not re-employ them after their
statement by Lucio Bellentani on release.
October 16, 2014.
Those six employees were not the last Communists to be arrested at VW do Brasil.
166 Ana Maria de Moura Nogueira, who had been a member of the illegal PCB since
DEOPS listing of reports from VW Works 1972, had been working as a clerical employee at VW since September 1977. Her
Security during the March 1979 strike activism on behalf of the Trotskyite influenced “Convergencia Socialista” grouping
(pages: 14), in: AESP, DEOPS. The other attracted the attention of the DEOPS, who arrested her on August 28, 1978. The
dismissed members of the Convergencia surviving records merely indicate that the Personnel department handed over
Socialista were Enilson Simoes de Moura, her file to the DEOPS on request. In her case it remains open to question whether
Maria Cristina Salay and Hilda ­Machado. the Works Security department had been watching her and assisted in her arrest.
The Works Security department also Based on the DEOPS’s investigation, criminal proceedings were opened against her
­handed their files over to the DEOPS. in November 1978. She was only spared a trial and lengthy imprisonment thanks
to the Amnesty Law enacted with effect from the end of 1978. A detailed report
167 drawn up by the Works Security department for the Political Police during the
Report by Ademar Rudge to the personnel strike in March 1979 names three other members of the Convergencia Socialista
director of VW do Brasil, September 9, who, in the same year, were dismissed by VW and arrested by the Political Police.166
1974, in: AESP, DEOPS, 50-Z-341-1135 to
1138. The close collaboration of the Works Security department with the Political Police
did not end with the break-up of the Communist Party cell, but was maintained
on a continuous basis. When VW Security chief Ademar Rudge reported to
the personnel director, the production director, and also the chairman of the
management board Wolfgang Sauer, on September 9, 1974 concerning the
proceedings at a trade union meeting and the involvement of VW employees,
a copy of the report was sent to the Political Police, evidently as a matter of
routine.167 Rudge’s report even informed the board that no VW employees had
spoken at the meeting.

This apparently insignificant incident permits a number of broader conclusions

to be drawn regarding the operations of the Works Security department and its
collaboration with the Political Police. Firstly, Works Security monitored the
political and trade union activities of company employees beyond the factory
gates. As Rudge in the same report also notified the Personnel department and the
personnel director of the military court’s judgement against the five Communist
former employees, it is certain that he had advised the board of the arrests two
years previously. The management board did not remain unaware of the arrest of
six employees.

63
V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

The Works Security department itself informed the Police of individual cases of 168
criticism against the military regime. When Works Security staff found a hand- Internal memo from Works Security, March
written poem mocking the Justice Minister Armando Ribeiro Severo Falcão in the 25, 1978; letter from the Policia Civil do São
IT materials store in March 1978, the department identified the suspects’ names Paulo to the DEOPS, March 27, 1978,
by cross-checking them against the payroll. The not inconsiderable amount of in: AESP, DEOPS, 50-J-000-5819.
time spent identifying the suspects is astounding: The satirical poem had not
been reproduced, and was not intended for public distribution. It had never left
the room where it was written.168

64
V W D O B R A S I L A N D T H E P E R S E C U T I O N O F P O L I T I C A L O P P O N E N T S O F T H E M I L I TA R Y R E G I M E

65
KO LUM N E N T I T E L
7. Pay and working conditions at
VW do Brasil in the 1960s and 1970s

← Final inspection, 1975

67
P AY A N D W O R K I N G C O N D I T I O N S AT V W D O B R A S I L I N T H E 1 9 6 0 S A N D 1 9 7 0 S

The German press had portrayed VW do Brasil as a model of German foreign 169
investment during the 1960s, but from 1973 onwards German journalists began Letter from Werner P. Schmidt to Leiding,
to focus on the problematic aspects of its authoritarian paternalism. When the February 26, 1973, in: UVW, 174 no. 576/1.
parliamentary secretary of state in the Federal Ministry for Economic Cooperation
arranged to visit the VW plant in February 1973 in the course of a trip to Brazil, 170
chairman of the management board Werner P. Schmidt was expecting negative Translation of an article from the daily
media coverage even before the delegation arrived.169 newspaper “A Folha de São Paulo”, February
18, 1973, relating to an interview by its
Schmidt’s negative expectations might have had something to do with the Germany correspondent with Hans Matt­
composition of the delegation. Parliamentary secretary of state Hans Matthöfer (a höfer, in: ibid. In relation to Matthöfer refer
member of the SPD party), who was very committed in his support for democratic to the Werner Abelshauser, “Nach dem
freedoms and workers’ rights in Spain (at the time still a dictatorship) and Latin Wirtschaftswunder: Der Gewerkschafter,
America, was suspected to have negative preconceptions as to the political and Politiker und Unternehmer Hans Mat-
social conditions in Brazil. When Matthöfer, in the course of his factory tour, asked thöfer” [After the Economic Miracle: the
why most of the workers appeared to be so young, an accompanying German trade unionist, politician and businessman
guide answered him that older workers were discarded.170 Hans Matthöfer], Bonn 2009.

Matthöfer’s impression was correct. The average age of the plant’s workers in 1977 171
was just 32.171 There is, however, no evidence that older workers were targeted VW do Brasil, 1977 Annual Report,
for dismissal in order to rejuvenate the workforce. The very young workforce by in: UVW, Z 174, no. 1028/18.
German standards reflected the demographics of Brazilian society, which was
significantly younger than in Europe because of the country’s high birth rate. The 172
employee fluctuation rate was lower than at Brazil’s other auto manufacturers – Elmar Unland, “Die Dritte-Welt-Bericht­
an indication that the Personnel department employed the tactic of making staff erstattung der Frankfurter Rundschau
redundant as a means of reducing pay levels less frequently than Ford and General von 1950 bis 1984: Eine statistische
Motors. However, terminating unskilled and semi-skilled workers’ employment Längsschnittanalyse” [Reporting on the
after less than three years’ service was an effective way to avoid upgrading them to a Third World by the Frankfurter Rundschau
better pay scale. from 1950 to 1984: a longitudinal statisti-
cal analysis], Münster 1984.
German quality newspapers had been increasingly critical in their reporting on
the investments of German companies in less prosperous countries since the early
1970s.172 Where previously the convention had been to focus on positive aspects
such as the transfer of capital and technology, journalists were now reporting
more frequently on negative aspects such as the lower levels of pay and workers’
benefits, and the discrepancies in terms of occupational health and safety. VW was
not immune to the increasingly critical reporting on the conduct of multinational
corporations in Latin America.

68
 P AY A N D W O R K I N G C O N D I T I O N S AT V W D O B R A S I L I N T H E 1 9 6 0 S A N D 1 9 7 0 S

173 On March 20, 1974, a feature in the schools radio programming of broadcaster
Letter from Backsmann to Neuffer, July 25, NDR titled “10 years of military dictatorship: a Brazilian celebration” quoted a
1974, in: UVW, Z 1, no. 66/1. claim by Amnesty International that VW do Brasil paid its workers just DM 150 a
month. Although few adult listeners would probably have heard the programme,
174 VW’s head of Public Relations sent a protest letter to NDR director of programmes
Doleschal, “Automobilproduktion” [Auto- Martin Neuffer. VW’s Public Relations department countered the negative
mobile production], p. 175, 210 (figures for reporting on social issues with the argument that, according to the latest pay scale,
1983). a tool-grinder actually earned the equivalent of DM 857 a month – almost six
times what had been claimed.173 The Public Relations department’s assertion was
175 correct, but it reflected only part of the truth. Qualified specialists such as tool-
According to Brazilian employment law, grinders were indeed well-paid, but represented only a relatively small minority
full-time employees were paid for 240 of the workforce. Nevertheless, by 1979 the average pay across all employees of
hours’ working time per month, as work- VW do Brasil was the equivalent of DM 687 – more than four times the Brazilian
free Sundays were also paid. However, the minimum wage equating to DM 150.
work-free Sunday payment was voided in
case of absence from work, even if not by There was a shortage of skilled metalworkers during the period of strong growth
the fault of the employee (Doleschal, “Auto- in Brazilian industry during the 1960s and 1970s. The highly productive and fast-
mobilproduktion” [Automobile production], growing auto manufacturers such as VW do Brasil paid high wages by Brazilian
p. 175, 210). standards, as a means of ensuring the long-term loyalty of qualified staff. While
12% of VW do Brasil’s workers were unskilled, and 50% semi-skilled, only 22% of
176 manual workers, or 17% of the total workforce, were qualified, hard-to-replace
Doleschal, “Automobilproduktion” specialists.174
[Automobile production], p. 201 (VW do
Brasil pay scale, applicable from April 1, The pay differentials between unskilled, semi-skilled and skilled workers were
1984). Owing to the unusually high Dollar/ substantially greater than in Germany. While a labourer on the lowest pay scale
Deutschmark exchange rate in 1984, 1, level 4, was paid an hourly rate equivalent to just US$ 0.91, receiving a monthly
converting to DM amounts would have wage equivalent to US$ 218 for 240 hour’ work,175 a semi-skilled worker on scale
suggested an excessively high pay level. 4 received US$ 1.40 an hour, or US$ 337 a month. A qualified specialist on pay
So, exceptionally here, amounts have not scale 7 received the equivalent of US$ 2.13 an hour, and US$ 512 a month; a highly
been converted into DM. qualified specialist on the top pay scale 9 was paid US$ 2.65 an hour and US$ 637
a month.176 While the differential between the lowest and highest pay scales at
177 VW AG in 1983 was 44%, at VW do Brasil it was 191%. Despite the relatively high
Ibid., p. 213 (figures for 1983). pay in the auto industry by Brazilian standards, only skilled specialists were
paid comparably to European levels. Of the salaried clerical staff, who accounted
for some 20% of the total workforce, 72% (corresponding to 14% of the total
workforce) were more highly qualified staff on pay scales 8 to 14.177

69
P AY A N D W O R K I N G C O N D I T I O N S AT V W D O B R A S I L I N T H E 1 9 6 0 S A N D 1 9 7 0 S

The steadily rising demand for cars also had negative effects on the workers’ 178
everyday working lives. Germany’s Works Constitution Act stipulates that the Ibid., p. 194
Works Council must give its consent to regular overtime working and special (worker figures estimated for 1974).
shifts. It was only in Autumn 1980, following a hard-fought labour dispute, that
elected employee representation, with competencies at least partially comparable 179
to those of a Works Council under German employment law, was introduced at Würtele, “Gewerkschaftsbewegung”
VW do Brasil. [Trade union movement], pp. 305-311.

Obligatory overtime was a permanent feature of everyday working life at VW do 180

Brasil during the 1960s and 1970s. On being recruited, staff were asked by the “Überall Deutschland” [Germany every-
Personnel department whether they would be willing to work overtime. Since a where], in: “Der Spiegel” 51/1969, pp.
general rejection of overtime working would have resulted in termination during 54-63. As late as 1981, the chairman of
an employee’s trial period, however, they had no choice but to agree. One or two German metalworkers’ union IG-Metall, Eu-
hours overtime was not infrequently worked in addition to a standard nine- gen Loderer, sharply criticised working con-
and-a-half hour day, with a one-hour lunch break. At the high-point of the boom ditions in the foundry on a visit to the São
in the Brazilian auto industry in 1974, each worker at VW do Brasil accrued 260 Bernardo do Campo plant (Telex from Paulo
additional working hours a year. As the demand curve flattened, annual overtime Dutra de Castro, Diretora Adjunta Relaçoes
hours per worker fell to 175 in 1976, and to 118 in 1978, though in 1980 they again Publicas at VW do Brasil, to VW AG, January
climbed back up to 158.178 In view of the low overtime rates paid, longer working 30, 1981, in: UVW, Z 1184, no. 356/2).
times were a cost-effective alternative to expanding production capacities.
181
With an early shift from 6 a.m. to 4.30 p.m. and a late shift from 4.30 p.m. to 2.30 Humphrey, “Brazilian Auto Industry”,
a.m., the plant management was able to run production for 20,5 hours, with just pp. 85ff.
a brief overnight break, so making optimum use of machine capacity.179 Based
on its longer standard working time (9,5 instead of 8 hours) and regular overtime
working, the plant in São Bernardo do Campo attained a much higher capacity
utilisation level than the VW AG plants in Germany.

Long working days and a high work rate induce fatigue and so increase the risk
of high accident rates. This hypothesis can unfortunately not be verified, as no
statistics or internal company reports on trends in work accidents at VW do Brasil
have survived. As far back as the mid-1960s, trade unionists were complaining of
dangerous and unhealthy working conditions at the VW plant in São Bernardo do
Campo. At the congress of the International Metalworkers’ Federation (IMF), the
general secretary of the São Bernardo do Campo metalworkers’ union complained
of “scandalous health and safety conditions”. The great heat and high dust levels
meant that many foundry workers suffered from respiratory diseases.180 In the
course of his research into industrial relations in the Brazilian auto industry from
the middle to the end of the 1970s, British industrial sociologist John Humphrey
heard from interviews with workers about the health-endangering noise in the

70
 P AY A N D W O R K I N G C O N D I T I O N S AT V W D O B R A S I L I N T H E 1 9 6 0 S A N D 1 9 7 0 S

182 press plant and the body shop, and about high emissions of carcinogenic and
Submission by Geßner for Berthold, August toxic substances such as welding gases, dichloromethane, trichloroethane and
20, 1981, in: UVW, Z 1184, no. 361/2. phenol.181

183 The especially bad working conditions in the foundry only improved during
Update planning for VW do Brasil 1981- the 1980s, thanks to better ventilation. In 1981, the VW Foreign Investments
1983, in: Minutes of the VW AG manage- department expressed the suspicion that VW do Brasil was not complying with
ment board meeting on September 8, 1980, occupational health and safety and emissions laws, and as a result extensive
Appendices, in: UVW, Z 1133, no. 10/3; capital investment would be required.182 When the management agreed to
minutes of the VW AG management board invest in more powerful extractors and improved noise reduction measures in
meeting on September 8, 1983, the press plant in the early 1980s under pressure from the now stronger trade
in: UVW, Z 373, no. 269/3. unions, the investment – despite being a comparatively small DM 5 million –
had to be postponed until 1983 because of the company’s heavy losses and the
184 tight liquidity position.183 VW do Brasil failed to make any greater investment
Minutes of the VW AG management in humanising its working conditions than it was able to finance from its own
board meeting on March 16, 1976, resources.
in: UVW, Z 373, no. 186/1
The working conditions at VW do Brasil were not considered as issues by the
185 management board of VW AG or the Group’s General Works Council until 1975.
Werner Würtele/Harald Lobgesang, It was only in March 1976, on his return from a trip to Brazil, that chairman of the
“Volkswagen in Brasilien – Entwicklungs­ management board Toni Schmücker suggested that a Works Council delegation
hilfe im besten Sinne?” [Volkswagen should visit São Bernardo do Campo.184 The delegation from the General Works
in Brazil – Development aid in the best Council, headed by its chairman Siegfried Ehlers (1926-1986), travelled to Brazil
sense?], 1978. in October 1976, and met with the São Bernardo metalworkers’ union through
the mediation of the International Metalworkers’ Federation (IMF). The VW
186 Works Council members heard serious allegations against the management of
pelegos (literally: saddlecloths): a synonym VW do Brasil from the union chairman: Terminations and recruitment of new
in Brazilian-Portuguese for trade unionists replacement staff to cut the wage bill for unskilled and semi-skilled workers;
who were pro-business, loyal to the govern- unbearable heat in the foundry; a ban on union information activities on the
ment, and uncritical. plant site; and close surveillance of employees by the Works Security department.
In view of this severe criticism, the delegation requested to meet with trade union
activists within the VW workforce.185

The meeting with the trade unionists at the company took an unexpected course.
The union representatives at VW do Brasil denied the criticisms by the local union
committee, and conveyed the impression to their German colleagues that all
was well with the workforce. Up to 1977, the few active trade unionists at VW do
Brasil were pro-company (pelegos),186 and largely uncritical of the management.
There was no elected and democratically legitimate employee representation
which could have provided the General Works Council with reliable information,

71
P AY A N D W O R K I N G C O N D I T I O N S AT V W D O B R A S I L I N T H E 1 9 6 0 S A N D 1 9 7 0 S

in the interests of the employees, with regard to conditions at VW do Brasil. Until

the election of the first Works Council in October 1980, the only democratically
legitimate discussion partner and reliable source of information available to the
General Works Council was the São Bernardo do Campo union committee. The VW
General Works Council had only two non-company channels of communication
on the subject of industrial relations at the Group’s largest international
subsidiary: through the International Metalworkers’ Federation (IMF), and
through the IG Metall International Relations department.

72
P AY A N D W O R K I N G C O N D I T I O N S AT V W D O B R A S I L I N T H E 1 9 6 0 S A N D 1 9 7 0 S

73
8. The strikes of 1978, 1979 and 1980

← Volkswagen Brasilia, 1977

75
TH E STRI KES OF 1978, 1979 AN D 1980

The previously docile metalworkers’ union in São Bernardo do Campo became 187
increasingly disputatious from 1977 onwards. The trigger for this increasing Luis Flavio Rainho/Osvaldo Martines
militancy was a report in the daily newspaper “Folha de São Paulo” on the Bargas, “As lutas operarias e sindicais dos
manipulation of official inflation figures. Based on a report from the World metalurgicos em São Bernardo” (1977-
Bank, the paper disclosed that the government and the state economic research 1979), São Bernardo do Campo 1983,
institute, Fundação Getulio Vargas, had published inflation rates for 1973 and pp. 29-44.
1974 which were much too low.187 The government’s subsequent correction of
the inflation rates confirmed that statistics had indeed been manipulated in past 188
years. Briefing by VW AG International Invest-
ments Department I relating to wage and
The purposely understated inflation rates had a direct impact on pay settlements salary increases at VW do Brasil, June 15,
in Brazilian industry. Since the Ministry of Labour and the labour courts based 1979, in: UVW, Z 1184, no. 355/1.
their decision-making on pay rises on the past year’s inflation rate and the
expected increase in prices in the current year, the workforce suffered losses
in real income in 1973 and 1974 despite the economic boom. In 1977, the trade
union economic research institute DIEESE calculated on the basis of this data that
the failure to increase pay in line with actual inflation in past years would require
and justify a 34% retrospective adjustment. In 1976 and 1977, too, pay rises were
only a little above inflation, and were in now way able to compensate for the loss
of purchasing power suffered in 1973/74. According to an analysis by Investments
Department I of Volkswagen AG, pay rose by 98.8% in the two years, and as such
were only just above the 94.6% increase in the cost of living in the São Paulo
region.188

The São Bernardo do Campo metalworkers’ union began mobilising its members
to fight for a graduated retrospective adjustment of pay rates. In the elections to
the union committee on January 31, 1978, the militant list headed by Luiz Inácio
Lula da Silva – who was to become famous throughout Brazil in subsequent years
under the name of ‘Lula’ – obtained a clear majority. The metalworkers’ union
initiated its campaign for restoration of pay levels (Campanha da Reposição
Salarial) by entering into dialogue with leading politicians from the governing
ARENA party, though the talks quickly came to a halt owing to the government’s
uncompromising approach. For the annual round of wage adjustments in the
Spring of 1978, it demanded that the 15% adjustment already made should not be
offset against the new pay settlement to account for rising inflation (1978: 39%).

As expected, the auto industry employers’ association was unyielding. In order

to impose its demands, the metalworkers’ union employed the ‘crossed arms’
method, whereby the employees turned up at their workplaces but did not start
working. In May 1978, a total of 100,000 workers in the greater São Paulo area laid

76
 TH E STRI KES OF 1978, 1979 AN D 1980

189 down tools. By transferring the labour dispute inside the plant, they avoided the
Regarding the 1978 strike see ibid., p. 65- risk of being attacked and arrested by the police at the factory gates. Although
96; cf. Humphrey, “Brazilian Auto Industry”, there were four VW employees on the local trade union committee, the union
pp. 160-175. organisation at VW do Brasil was still too weak for a widespread strike. The trade
union leadership at VW was pro-business, and rejected strike action.189
190
The figure of 800 striking workers is con- As there had never been a strike at VW since the plant’s founding, both the
tained in a report by the DEOPS, in: AESP, management and the workforce were equally unpractised in strike tactics. With
DEOPS, 43-Z-0-4526. A report by the police no in-house union support, the striking workers at VW were left to their own
office covering São Andre, São Bernardo do devices. The strike began on May 17, 1978 in the tool shop, where 90% of the
Campo and Diadema (ABCD) to the DEOPS workers laid down tools.190 The strike’s concentration on the tool shop was no
dated May 17, 1978 estimated the number coincidence, as the tool-makers were among the best-paid staff, and were able to
of strikers at 700. This figure was indirectly stand several days’ loss of pay even without a functional strike fund. They were the
confirmed in a report by VW do Brasil to the most politically aware, and had much less fear of being dismissed than the mainly
General Works Council, which had request- semi-skilled workers in the body shop and in final assembly. During the boom
ed information on the consequences of the in the Brazilian auto industry in the 1960s and 1970s, tool-makers and other
strike, dated September 28, 1978. qualified specialist metalworkers were better protected against the consequences
(see UVW, Z 119, no. 382/2). of politically motivated dismissal. Their militancy was further intensified by
news of a planned shortening of the lunch break and by what was perceived as
191 a disappointingly small special bonus equivalent to just DM 72.50 marking the
Report by the ABCD police office to the plant’s 25th anniversary.191
DEOPS on May 15, 1978 concerning a meet-
ing of the metalworkers’ union on May 13, VW Works Security was much more robust in its response during the strike than
1978, in: AESP, DEOPS. the Works Security departments of the other auto plants where strikes were taking
place, at Ford, Chrysler, Mercedes and Saab-Scania. As soon as the strike began, the
Works Security management mobilised its armed staff to the tool shop, ordering
them to stand three metres apart adjacent to the tool-makers’ workstations.
To prevent communication between the strikers, Works Security disabled the
telephone system in the shed. The solid block of guards hindered the tool-makers
from communicating among themselves and with their colleagues in the other
sheds in order to mobilise strike action. Works Security ordered the tool-makers
to leave their workstations and get on buses at the shed exits which would drive
them home. Works Security prevented a team from the “Rede Globo” TV channel,
who has been notified in advance of the strike by the union and were intending to
report on it, from entering the plant.

To intimidate the strikers, Works Security arranged for 28 tool-makers to be

dismissed with the consent of the Personnel department. However, the plant
management failed in its aim of breaking the will of the striking tool-makers.
The tool-makers did not resume work until May 24, after the management had

77
TH E STRI KES OF 1978, 1979 AN D 1980

ordered that the dismissed staff be reinstated. For the first time since the start 192
of the military dictatorship, the auto industry employers’ association (Sindicato Gaspari, “A ditadura acabada”,
Nacional da Indústria de Tratores, Caminhões, Automóveis e Veículos Similares – Rio de Janeiro 2016, p. 142.
SINFAVEA) negotiated with the union on a local industry-specific collective pay
agreement with the silent consent of the government. The negotiations with
the auto industry association culminated in an 11% increase in real incomes.
Although the union had demanded a 15% real increase, it had made a first step in
compensating for the pay rises withheld in past years.

Despite the first-time recognition of the union as a legitimate collective pay

negotiating partner by the employers’ association, in the Summer and Autumn of
1978 the VW management board was still well away from accepting independent
trade union representation of workers’ interests. Following the Third Congress of
São Bernardo do Campo Metalworkers in September 1978, the plant management
dismissed 12 of the 20 VW staff who had attended the event. According to multiple
reports in the “Journal do Brasil” daily newspaper, the Works Security department
continued its established practice of informing the Political Police of suspected
trade union and left-wing activists.192

Although it was still a criminal offence to organise a strike, the Brazilian police
and judicial bodies had refrained from prosecuting the strike leaders. In 1978,
the military leadership headed by the country’s President General Ernesto Geisel
enacted the more moderate powers aimed at a gradual return to the rule of law
and unrestricted parliamentary democracy with fully freedom for all political
parties. In the political debate concerning the Land’s future, the terms ‘opening
up’ (abertura) and ‘relaxation’ (distensão) gained predominance over the striving
for security based on imposed quietude. A key step on the road to democracy
was the Amnesty Law passed by the federal parliament on August 28, 1979,
by which the new government of General João Baptista de Oliveira Figueiredo
issued an amnesty to politically persecuted opponents of the regime. However,
the Law also protected the former military governments, as well as police and
military personnel, against criminal prosecution for violations of human rights.
It prevented judicial accounting for the political persecution carried out and of the
crimes committed against the political opponents of the dictatorship.

The management board of VW do Brasil was passive and cautious in its response
to the emerging transformation of the military dictatorship into a parliamentary
democracy and the trade unions’ demands for partnership in collective pay
bargaining, workers’ participation and appropriate material sharing in corporate
success. In 1978 and 1979 there were as yet no indications of the company

78
 TH E STRI KES OF 1978, 1979 AN D 1980

193 gradually moving away from it ‘master its own house’ attitude and authoritarian
Minutes of the management board meet- paternalism exhibited to date in favour of corporate governance founded on social
ing at VW do Brasil, November 9, 1979, partnership. In his reports to Toni Schmücker, Sauer was primarily concerned
in: UVW, Z 174, no. 2716/2. with the social risks of the liberalisation process. During the auto workers’ strike
in March 1979, Sauer described the gradual political liberalisation as a potential
194 risk to the country’s economic stability and social peace, rather than welcoming
Wolfgang Sauer was a commercial trainee it as a long-overdue reform process. Again in November 1979, Sauer was not really
at Bauknecht in Stuttgart from 1947 optimistic in his assessment of the chances of success of the democratisation
through to 1950, and from 1950 to 1951 process: “It might be that the system – which can be seen as an attempt by a
worked in the company’s Foreign Trade militarily orientated government to adjust to a democracy – will not work.”193
department. From 1951 to 1954 he headed Based on his personal experience of unstable democratic regimes, he expected
the Commercial department of Baukne- that Brazil was “facing three or four tough years”, and should be ready to deal with
cht’s general importer in Portugal, Roberto “political radicalism”.
Cadell. After undergoing in-house training,
he was sales manager of Bosch in Caracas The management board’s persistence in holding to an authoritarian form of
from 1955 to 1961, and from 1961 to 1963 corporate governance was not solely a consequence of the political conditions,
he managed the Bosch branch office in such as Brazil’s employment laws, but also of the chairman’s career experience up
Buenos Aires. From 1963 to 1966 he was to that time. The chairman of the management board since 1973, Wolfgang Sauer,
sales manager – and from 1966 to 1972 had spent most of his career outside Germany.194 He had no direct experience
managing director – of Robert Bosch in of the German model of social partnership and institutionalised workers’ rights
Brazil. He joined the Audi management of co-determination. What Sauer had that his predecessors Leiding and Schmidt
team in 1972, and with effect from July 1, did not, however, was 10 years’ experience of Brazil and a deep-seated knowledge
1973 he was appointed chairman of the of Brazilian society. Sauer was familiar with the Brazilian culture and mentality,
management board of VW do Brasil. Sauer had personal relationships with the administrative and economic elites, and – in
was president of the German-Brazilian contrast to all the former chairmen – spoke fluent Portuguese.
Chamber of Commerce from 1974 to 1977
(Information based on the profile of Sauer By the time of the next pay dispute in March 1979, the political conditions had
in the employees’ newspaper “Familia”, altered to the advantage of the unions. With the rescinding of the Emergency
June 1973). Powers Act Number 5 (Ato Instituçional No. 5) at the end of 1978, the risk of
arbitrarily imposed lengthy imprisonment without trial was at an end. Whereas
195 Justice Minister Armando Falcão and the Federal Police had largely banned
Gaspari, “A ditadura acabada”, pp. 54ff. reporting on the strike in May 1978, during the large-scale strikes from March to
May 1979 the Brazilian media were for the most part able to report unhindered
on the union and the striking workers, thereby drawing greater public attention to
their aims.195 On October 13, 1978, the Brazilian federal parliament (the Congress)
passed a law amending the constitution which rescinded the censorship of radio
and television programmes prior to broadcast, marking an organised transition
to a more liberal domestic policy. The only exemption from the restored media
freedoms was reporting on the military. The new President João Figueiredo
(1918-1999) continued the military’s hold over the presidency, but – as opposed

79
TH E STRI KES OF 1978, 1979 AN D 1980

to his predecessor – did enjoy at least some elements of democratic legitimacy, 196
having been elected by a partially democratic electoral college. The amendment Decreto-Lei dated August 4, 1978 (http://
to the constitution on October 13, 1978 made the future President a transitional www.planalto.gov.br/ccivil_03/decreto-lei/
President. His period of office was extended from five to six years, but was to end Del1632impressao.htm, accessed June 16,
with the free election of a civilian President in 1985. 2017),.

An apparently undramatic decree alleviated the legal ban on strikes dating to 197
1964 at least in part. A government decree in August 1978 removed the strike ban Rainho/Bargas, “Metalúrgicos em
from the National Security Act and incorporated it into general employment law. São Bernardo”, p. 112.
While the government did not abolish the threat of criminal prosecution for strike
leaders, merely participating in a strike in a non-essential sector such as the auto 198
industry was no longer an offence.196 The state labour courts did, however, still Demands of the São Bernardo do Campo
have the right to declare strikes for higher pay and in pursuit of other demands metalworkers’ union in the 1979 wage
illegal and to remove elected trade union committee members from office. campaign, in: ibid., pp. 214f.

The way the strike in May 1978 had gone encouraged the workers at VW do Brasil
to again fight for an increase in real incomes the next year. If the view of union
strike historians Luis Flavio Rainho and Osvaldo Martines Bargas is to be believed,
the mood among the metalworkers prior to the strike on March 13, 1978 was one
of euphoria and confidence.197 The restoration of fundamental human rights
and the abolition of media censorship allowed actors in civil society to articulate
and communicate their demands openly. The gradual transformation of the
dictatorship into a pluralistic state under the rule of law created a setting in which
they were able to deal with long-simmering social conflicts openly and publicly.
The potential counter-response of the state executive became more calculable and
constrained.

The determination of the unionised metalworkers at the auto plants in São

Bernardo do Campo was reflected in their strike demands. In addition to a
substantial increase in real incomes in order to compensate for the withheld
adjustment of wages in past years, the trade union demanded protection against
termination of employment for one trade union representative for every 500
employees and a reduction in the weekly working time from 47.5 to 40 hours
with retention of full pay. To protect against pay cuts through enforced workforce
fluctuation, newly recruited employees were to be paid no less than the staff they
replaced.198 The union demanded a 30% overtime bonus if a company ordered
overtime working for more than two days.

80
 TH E STRI KES OF 1978, 1979 AN D 1980

199 The unions regarded the employers’ association’s offer as unacceptable. Although
Ibid., pp. 122f. the employers offered a 54% pay rise for the key pay scales in the auto industry, the
rise would have merely offset the inflation rate and not increased real incomes.
200 The employers wanted to offset the pay rise against the recently implemented
Telex from Sauer to Schmücker, March 20, 11% adjustment for inflation, so a 54% rise less the adjustment for inflation would
1979, in: UVW, Z 1184, no. 355/2. merely have balanced out the expected inflation rate of 43%.199

201 The employers fundamentally rejected the unions’ other demands. In response
Rainho/Bargas, “Metalúrgicos em São to what they saw as the employers’ inadequate offer, 150,000 metalworkers in the
Bernardo”, pp. 126f. Film director Zetas cities of São Andrè, São Bernardo do Campo, São Caetano and Diadema went on
Malzoni made a documentary about the strike on March 13, 1979.200 The workers at VW played a special role. As VW was
strikes of 1979 and 1980 on behalf of the by far the largest employer, and the Works Security department had isolated the
São Bernardo do Campo and Diadema striking workers from the rest of the workforce back in May 1978, the almost
metal­workers’ benevolent and cultural complete work stoppage at VW symbolised an organisational breakthrough for
association (Associaçao Beneficiente e the trade union movement.
Cultural dos Metalurgicos de São Bernardo
do Campo e Diadema) titled “Linha The union activists shifted their action from inside the plant to outside the
de Montagem” [Assembly line] (www. factory gates, in order to avoid a direct confrontation with Works Security.201 As
youtube.com/watch?v=ILDAknbMtjo and Works Security was unable to break through the picket line outside the factory
www.youtube.com/watch?v=Is2LyYjO4nk, gate by its own force owing to the numerical superiority of the workers, VW
accessed July 13, 2017). became the only company in the region to request the assistance of the Military
Police (Policia Militar). On March 14, the Military Police moved onto the VW site,
202 setting up quarters in the training workshop for the duration of the strike. The
Report by the “A Folha de São Paulo” daily plant management not only allowed the Military Police to occupy its site, but also
newspaper, March 22, 1979. ordered its canteen staff to cater for them.202

203 To guard against reprisals by the employers, the union activists from VW formed
DEOPS listing of reports from VW Works picket lines outside the gates of other plants, while their colleagues from other
Security during the March 1979 strike companies did likewise outside the VW plant. In view of the massive Police
(pages: 14), in: AESP, DEOPS. Regarding the presence outside the factory gates, the trade unionists shifted the focus of their
stationing of Military Police on the VW site activities to the company bus stops. There they were able to persuade numerous
see Rainho/Bargas, “Metalurgicos em São colleagues to join the strike initially without threat or hindrance by the Police.
Bernardo”, p. 130.
The Military Police’s occupation of the plant site with the company’s consent
was a clear sign of VW’s collaboration with the organs of the military regime.
Evidence of this survives in the daily incident reports made by the Works Security
department to the Political Police.203 Works Security also reported on purely in-
house incidents, and gave the police the personal details of strike activists they
had identified. Works Security staff photographed strikers on the picket line
for identification purposes, and exchanged the photos with the works security

81
TH E STRI KES OF 1978, 1979 AN D 1980

departments of neighbouring auto plants. At the end of the strike, Works Security 204
provided the Political Police with a list of 47 VW employees who had been Telex from Sauer to Schmücker, March 20,
identified as strike leaders and pickets on the basis of newspaper photographs or 1979, in: UVW, Z 1184, no. 355/2.
statements from informants. The Police arrested 18 of them.

Despite the visible threat posed by Works Security and the Police, the union
mobilisation proved successful. On the second day of the strike, 60% to 70% of
salaried clerical staff did turn up for work, but only 10% to 15% of the factory floor
workers. Production came to a complete stop because of the high absence rate. As
VW do Brasil was continuing to increase its production in 1979, and was easily able
to sell all the cars it produced, every strike day meant a loss of production and thus
the loss of around 2,200 vehicle sales. Although as many as a third of workers went
back to their posts from March 16 onwards, production remained largely stopped.
The sequential production process meant that the loss of just one link in the chain
was enough to prevent effective production.204

The company management had escalated the labour dispute by allowing the
Military Police to occupy the plant site. The union committee criticised VW’s
behaviour in strong terms at a meeting attended by tens of thousands of striking
workers at the São Bernardo do Campo football stadium. The Works Security
department extended its operations to cover the main company bus stops,
informing the Police of the pickets gathered at them. Based on this information,
the Police arrested a number of pickets at the bus stops and handed them over to
the Political Police for interrogation. This handover to the Political Police (DEOPS)
remained without consequence for the workers only because the DEOPS, in the
face of massive public pressure, had ceased carrying out torture, and detainees
could only be held in custody without warrant in exceptional cases.

The VW do Brasil management board was surprised by the Brazilian press’s

open reporting, which was no longer censored by the government or subjected
to the self-censorship of the past. The press reporting framed the Military
Police operation in a highly negative light. The Police’s actions in obstructing
and arresting strikers self-evidently contradicted the government’s proclaimed
relaxation (distensão) of its domestic policy and the new acceptance of political
pluralism (abertura). The in part shocked, in part outraged responses of the
management board indicated that VW do Brasil had underestimated the
implications of restored press freedom, and was not prepared for a public
confrontation with the union. The chairman of the management board Wolfgang
Sauer described the strike movement as “a political demonstration and trial

82
 TH E STRI KES OF 1978, 1979 AN D 1980

205 of strength”, thereby calling into question the legitimacy of the dispute under
Letter from Sauer to Schad (Management employment law.205 The strike was without doubt exemplary in nature, as the
Personnel department, VW AG), May 28, unions were also attempting to impose their right to strike on the government.
1979, in: UVW, Z 1184, no. 355/2. The issues at the heart of the strike, however, were purely labour-related demands
such as higher real incomes and improved working conditions, which Sauer
206 attempted to discredit by labelling them “political”.
Arns was Archbishop of São Paulo from
1970 to 1998, and was appointed a Cardi- The solidarity exhibited in the São Paulo region was key to the social acceptance of
nal in 1973. Cláudio Hummes (a Cardinal the strike and the striking workers. The Bishop of Santo André, Cláudio Hummes
since 2001) had been Bishop of São André (b. 1934) and the Archbishop of São Paulo, Paulo Evaristo Arns (1921-2016) both
since 1975, and succeeded Arns as Arch- expressed solidarity with the workers’ demands, and granted strikers fleeing from
bishop of São Paulo from 1998 to 2006. police actions sanctuary in churches.206 At the request of the union committee,
Bishop Hummes came to the VW factory gate on the morning of March 20th
207 and asked the Military Police to refrain from violent action against pickets.207
Rainho/Bargas, “Metalúrgicos em São Hummes’s attendance at a large-scale strike meeting of 70,000 metalworkers was
Bernardo”, p. 130. of particular symbolic importance. Arns and Hummes were adherents of so-called
Liberation Theology, and had already previously spoken out against torture and
208 arbitrary arrest and in favour of greater social justice in Brazil. In the strongly
Ibid., pp. 146f.; cf. the written report by Catholic Brazilian society, the expression of political views by the clergy assumed
VW do Brasil to VW AG, undated (end of more than just major symbolic importance. It imbued the strikers’ demands
March 1979), in: UVW, Z 1184, no. 355/2. with a moral and social legitimacy. The Church appealed for donations of money
and food for the striking workers’ families, handled the distribution of aid,
and provided key moral and logistical support in the labour dispute. The public
authorities were also not unified in their opposition to the strikers. The Mayor of
São Bernardo do Campo Tito Costa publicly expressed solidarity with the trade
union, and called on the Police to withdraw from union meetings being held in
the city’s main square.

The metalworkers’ union ended the strike on March 27th, with the declared intent
of negotiating an acceptable result in the subsequent 45 days of ‘truce’. So as not
to weaken its negotiating position, the union called on the workers not to do any
overtime during this period. On instruction from the plant management, at least
some line foremen pressurised workers not to refuse overtime. The chairman
of the auto industry association Mário Garnero assured the union that VW
would not dismiss any staff for taking part in the strike. However, this promise
by Garnero – whose main job was as legal affairs director on the VW do Brasil
management board – failed to convince the union committee of the employers’
good intentions.208 In fact, the VW Personnel department did fail to re-employ
some of the dismissed staff.

83
TH E STRI KES OF 1978, 1979 AN D 1980

Shortly before the end of the truce period, following lengthy negotiations, the 209
metalworkers’ union and the employers’ association reached an agreement which Ibid., pp. 154f., in: Z 1184, no. 355/1.
met many of the union’s demands. Although the Ministry of Labour had declared
a collective pay agreement involving a rise of more than 60% as unacceptable 210
for reasons of political stability, the employers, led by VW management board Letter from Sauer to Schad, May 28, 1979,
member Garnero, accepted a 63% pay rise, which was 7% above the inflation rate. in: UVW, Z 1184, no. 355/2.
While the union also obtained an agreement to retrospectively pay 50% of working
time lost during the strike, it failed to impose its other demands.209 211
Telex from VW do Brasil to Schmücker
During the March 1979 strike, the management board of Volkswagen AG for the and Briam, April 27, 1979,
first time received detailed and continuous information on developments in in: UVW, Z 1184, no. 355/2.
industrial relations at VW do Brasil. Almost daily telex messages provided Group
head office in Wolfsburg with insights into how the dispute was progressing from 212
the perspective of chairman of the management board Wolfgang Sauer. As VW do Memo on the German television broad­
Brasil had to date always made a positive contribution to the Group’s earnings, caster ZDF’s programme “Auslandsjournal”
and its vehicle production was barely able to keep up with demand, the Group on April 27, 1979, in: UVW, Z 174, no.
board responded with concern to the loss of production. 2116/2. VW do Brasil management board
member Gerber was still holding to this
Wolfgang Sauer provided Group head office with detailed information, but false representation in June 1979 (Telex
that information was not always complete and correct. His assertion that the from Gerber to Adams, Investments
employers were offering a pay rise of up to 63%, and the strike was avoidable, Department I, June 26, 1979,
purposely hid part of the truth.210 The employers were offering a 63% rise only in: UVW, Z 1184, no. 361/2.
for the lowest pay scales, who earned a maximum of three times the very low
minimum wage. Most of the semi-skilled workers at VW do Brasil earned more 213
than three times the minimum wage, and with the initially offered 60% rise would “Bonner Generalanzeiger”, June 16, 1979,
have had an increase in real income of just 4%.211 in: UVW, Z 1184, no. 390/3.

Sauer only took back his false assertion that the Military Police had demanded
access to the plant site on the orders of the São Paulo state government after
critical querying by the Group board.212 He legitimised the active assistance given
to the Military Police with the inaccurate claim that the “reckless and often violent
picket lines” had forced him into the decision, and that the union had stirred up
the workers against the management. No record remains of Schmücker’s response
to Sauer’s conduct and the false information he gave concerning the Police
operation. According to an article in the “Bonner Generalanzeiger” newspaper
on June 16, 1979, Schmücker is said to have “furiously read Sauer the riot act”,213
though the truth of the report cannot be verified. By contrast, there is clear
evidence that Schmücker put his foot down to end the controversy concerning
the appropriateness of the company’s media communications strategy. In August
1980, Schmücker defended the criticism of the VW do Brasil management board

84
 TH E STRI KES OF 1978, 1979 AN D 1980

214 by the VW Works Council as a legitimate in-house expression of opinion, and

Telex from Schmücker to Sauer, August 13, rebuked Sauer for his criticism of the policy of open communications in relation
1980, in: UVW, Z 174, no. 2716/2. to the conflicts at VW do Brasil in clear terms, saying “We were both always agreed
that the extreme approach – playing dead – would definitely be entirely wrong.”214
215
Letter from Schmücker to Loderer, May 11, Sauer had discernible difficulties adapting to the re-emergent political pluralism
1979, in: UVW, Z 1184, no. 355/2. in Brazil, characterising criticisms by journalists and opposition politicians
indiscriminately as “biased” and the results of negative attitudes to multinational
216 corporations. His allegation that union propaganda was characterised by
Letter from Loderer to Schmücker, April 30, “confused, emotional tirades” could not be dismissed out of hand however. Lula
1979 in: ibid., UVW, Z 1184, no. 355/2 had talked of VW’s management in the same context as National Socialism and
the Holocaust, which greatly distressed Sauer.
217
This was a reference to the democratisation The previously unsullied relationship of trust between the chairmen of VW AG
of Brazil. and of VW do Brasil was damaged by Sauer’s conduct during the strike. Schmücker
deemed it necessary to apologise in a letter to IG Metall union chairman and
218 deputy chairman of the VW supervisory board Eugen Loderer (1920-1995) for the
“Der Spiegel”, 16/1979, pp. 23f.. fact that “it had been made difficult for our management to exert any influence
[on VW do Brasil]” and that Sauer had not received two members of the IGM
219 central committee who had requested a meeting.215 The VW Group came under
Transcript and memo on the German pressure from the IG Metall union because “in the recent dispute VW evidently
television broadcaster ZDF’s programme took an extremely harsh approach in its dealings with striking workers”.216 Loderer
“Auslandsjournal” on April 27, 1979, informed Schmücker that “the management’s inflexibly harsh response cannot
in: UVW, Z 174, no. 2716/2. be regarded as prudent in view of recent political developments”.217 VW do Brasil
also faced indirect criticism from Germany’s Chancellor Helmut Schmidt (1918-
220 2015). On his trip to Latin America in April 1979, Schmidt told journalists that
Briefing by Dr. Ekkehard Wesner (VW AG German companies in Latin America needed to recognise trade unions as part of a
Public Relations department) for Anton democratic society.218
Konrad (VW AG Public Relations depart-
ment) and Karl-Heinz Briam (personnel German journalists also made the public in Germany aware of the close
director) on the “Monitor” programme on collaboration between VW do Brasil and the Military Police. During the strike,
July 3, 1979, in: UVW, Z 174, no. 2716/2. VW do Brasil refused access to a film crew from German television broadcaster
It also includes a transcript of the pro- ZDF’s international politics magazine programme “Auslandsjournal” with the
gramme. barely credible argument that the journalists’ safety could not be guaranteed
because of the pickets.219 In its edition on July 3, 1979, television broadcaster ARD’s
information programme “Monitor” reported critically on the conduct of VW do
Brasil during the metalworkers’ strike. The union committee member and VW
employee Devanir Riveiro stated in an interview that VW do Brasil had been the
only company to have dismissed over 100 strike activists, requested the Military
Police to occupy the plant site, and passed on ‘blacklists’ of dismissed employees
to other companies.220

85
TH E STRI KES OF 1978, 1979 AN D 1980

The Public Relations department characterised the “Monitor” feature as “highly 221
polemic”, prejudiced and lacking in objectivity.221 In June 1979, Riveiro repeated Telex from Anton Konrad to Walter Nori
his allegations at a conference of VW Group employee representatives in (VW do Brasil Public Relations), July 5, 1979,
Wolfsburg attended by chairman of the management board Toni Schmücker, in: UVW, Z 174, no. 2716/2.
who by his presence signalled his willingness to engage in open dialogue with the
General Works Council.222 Schmücker responded to Riveiro’s critical questions, 222
but stressed the autonomy and independent responsibility of the corporate “Der Gewerkschafter” [The trade unionist]
management in Brazil and rejected the idea of direct intervention by the Group 7/1979, pp. 37ff.
board. In an open and also controversial one-to-one discussion, personnel director
Karl-Heinz Briam (1923-2012) attempted to persuade Riveiro to employ restraint 223
in his communications with journalists, in order to minimise the damage to VW’s Plans for the trip to Brazil by Briam and
reputation. Ehlers, in: UVW, Z 174, no. 2716/2.

Schmücker was not willing to criticise the situation at VW do Brasil publicly, but 224
he certainly was not reluctant to do so within the company. The Group board According to Briam’s report to the VW AG
decided to send personnel director Karl-Heinz Briam and chairman of the Group’s supervisory board meeting on November
General Works Council Siegfried Ehlers to attend the celebrations marking the five 12, 1980, in: UVW, Z 119, no. 451/1.
millionth vehicle produced by VW do Brasil.223 Schmücker’s decision not to attend
in person could be interpreted by the management board of VW do Brasil as a 225
gesture of critical distancing. By delegating the personnel and labour director, the Overview of income and benefits
Group board demonstrated that it was in future intending to pay more attention at VW do Brasil, September 27, 1979,
to industrial relations and work and pay conditions in Brazil. The visit by the in: UVW, Z 174, no. 2716/2.
former metalworkers’ union official Briam and General Works Council chairman
Ehlers was intended as a signal of recognition and responsibility to the trade
unionists at VW do Brasil.

The schedule for the 15-day trip from October 28 to November 11, 1979 included
a visit to Brazilian Minister of Labour Murilo Macedo, at which Briam and Ehlers
sought to clarify the legal and political conditions for establishing employee
representation.224 At a meeting with the committee of the São Bernardo do Campo
metalworkers’ union, Ehlers for the first time established a dialogue between the
General Works Council and their Brazilian colleagues. Karl-Heinz Briam prepared
thoroughly for his visit to VW do Brasil. The VW AG management board had
previously shown little interest in working conditions at VW do Brasil, but on
Briam’s behalf the VW AG Personnel department requested detailed information
on pay, voluntary benefits, training facilities and employee fluctuation.225

In a presentation to the management board of VW do Brasil, Briam conveyed his

personal impressions and his expectations of a transformation in the corporate
culture. Briam argued diplomatically, stressing that it was not feasible to “gauge

86
 TH E STRI KES OF 1978, 1979 AN D 1980

226 Brazil, the plant and the company’s industrial relations by German standards”, and
Minutes of the VW do Brasil management that change in the company could not be enforced as an order from Germany.226
board meeting, November 9, 1979, Since a transformation in the corporate culture could not be enforced by the
in: UVW, Z 947, no. 362/2. parent company, Briam appealed to the board’s ambitions, encouraging it to
engage in change management. He encouraged the board’s willingness to establish
227 a freely elected Works Council with the practical argument that a Works Council
Memo of a telephone call between Sauer would focus attention on in-house concerns, and help to separate corporate issues
and the VW AG board, March 31, 1980 from general political areas of conflict.
(signed off by Schmücker and Briam), in:
UVW, Z 610, no. 178/2; minutes of the VW Briam was misled by personnel director Admon Ganem and by Sauer in two not
AG management board meeting on May 5, unimportant matters. The collection of trade union membership dues by the
1980, Appendices. companies was not a sign of their recognition, but rather a consequence of the
long-standing state control of the unions. Contrary to the denials by Ganem and
228 Sauer, VW do Brasil and other major players in the metal industry maintained
Mario dos Santos Barbosa, “Sindicalismo ‘blacklists’ of employees who had been dismissed because of their political
em tempos de crise: A experienca na activism. Sauer and his colleagues responded to Briam’s friendly nudging with
Volkswagen do Brasil”, São Paulo 2003, pp. verbal assurances, but with little will to implement the suggestions.
108-111. See also “Süddeutsche Zeitung”,
April 25, 1980: “The labour dispute is turn- The management board of Volkswagen AG did not yet conclude from the
ing into a power struggle with the govern- 1979 labour dispute that it needed to press VW do Brasil to find a negotiated
ment” and the report in “The Economist”, solution in the next pay round and avoid a lengthier strike as far as possible. The
May 17, 1980: “A martyr is born”. intransigence of VW and the other auto manufacturers also stemmed from the
excessively high expectations of the metalworkers’ union, which was demanding
a 15% increase in real income and a quarterly adjustment of pay rates to inflation.
Despite the boom in 1979, VW do Brasil had made only a small profit due to rising
inflation and government price controls. As government price controls prohibited
offsetting increases in real incomes against vehicle prices, the board categorically
rejected an increase in real income of more than 6%.227

After the failure of pay negotiations between the employers’ association and the
metalworkers’ union, on April 1, 1980, 250,000 metalworkers in the São Bernardo
area went on strike. While the government had learned lessons from the last
strike, opting not to deploy the Military Police against pickets, after 17 days of
strike it unilaterally intervened in the dispute against the union. The Ministry of
Labour declared the strike illegal, and removed the union committee from office
pursuant to the still enforced authoritarian employment laws. On April 19, 1980,
the Federal Police (Policía Federal) even arrested the union chairman Lula and 11
other members of the union’s leadership. The arrest of the union leader signalled a
conscious escalation of the labour dispute by the government which incited much
greater solidarity on the part of the IG Metall union and the VW General Works
Council with the Brazilian workers than had been the case as recently as 1979.228

87
TH E STRI KES OF 1978, 1979 AN D 1980

The São Paulo state industrial confederation (FIESP) pursued the tactic of forcing 229
the union to its knees by breaking off the negotiations. The deposed union Minutes of the meeting of the Works
committee chaired by Lula went on hunger strike while in police custody in order Council committee at the VW plant in
to force his release and the resumption of pay negotiations. The solid strike front Wolfsburg on May 14, 1980,
began to crumble after four weeks. VW was able to restart the assembly lines for the in: UVW, Z 119, no. 901.
Beetle and the Brasilia on April 29. In view of the employers’ intransigence, after 41 See also the report of International Invest-
days the general assembly of the metalworkers’ union inevitably voted to return ments Department I at VW AG, May 9,
to work. The union had no option but to accept the 7% increase in real income 1980, in: UVW, Z 1184, no. 390/1.
decided on by the state labour court.229 All the union’s other demands, such as
an employment guarantee for the next 12 months, a quarterly adjustment of pay 230
rates to inflation and the establishment of Works Councils, were rejected by the Report by VW do Brasil management board
employers. member Gerber at the VW AG manage-
ment board meeting on September 18,
The auto industry had not paid so dearly for this success as it first appeared. 1980, in: Minutes of the management
Since the auto industry was performing well, until the dramatic collapse in sales board meeting on September 18, 1980.
in Spring 1981, VW initially expected to see the production and sale of 47,000
vehicles lost as a consequence of the labour dispute. Although VW was only able to 231
recover a third of its lost production (16,700 out of 47,000 units) by the year-end, Report on the impact of the strike in Brazil,
the impact of the strike proved less than first expected. As a result of the tighter in: Minutes of the VW AG management
financing conditions for new vehicles, VW do Brasil missed its original sales target board meeting on May 5, 1980, Appendices,
of 549,000 units by a substantial margin, selling 514,000 units.230 in: UVW, Z 133, no. 6/2.

The consequences of the strike were manageable for the VW Group as a whole, too,
and turned out to be less serious than feared. Owing to the slow sales of the US-
built Rabbit (the American version of the Golf), the loss of supplies of Golf engines
for the US plant in Westmoreland, Pennsylvania posed little problem. The loss of
100 Passat engines and 600 Passat gearboxes a day for the VW plant in Baunatal
likewise did not present the Group with major problems. The stocks in Germany
at the time were sufficient to cover a lengthy production outage. Following the
resumption of production in Brazil, VW was able to bridge the time gap until the
first component deliveries were made by using air freight.231

Before the strike began, Sauer had assured Schmücker that VW do Brasil would
remain passive in its behaviour during the dispute. While Works Security was not
this time deployed against striking workers, the Personnel department dismissed
76 employees in the course of the strike for allegedly taking part in fights
and damaging property. These allegations were surprising, since the striking
workers had followed the union’s instructions to keep off the plant premises and
not to place pickets outside the factory gates. There were no reports from the
management in São Bernardo that plant property had been damaged, or that

88
 TH E STRI KES OF 1978, 1979 AN D 1980

232 violent confrontations had taken place outside the factory gates.232 A number of
Several members of the Works Council in personnel files of striking employees indicate that strike activists were dismissed.
Wolfsburg questioned the veracity of this In those cases, the dismissals were justified not by unlawful acts against VW and
information from VW do Brasil at a Works its employees, but by protracted absence from work without permission.
Council meeting on June 11, 1980 (UVW, Z
119, no. 901). According to an information Like other companies in the auto industry, the VW Works Security department
report by the state intelligence service SNI handed over to the Political Police a list of strike activists comprising a total of
dated March 28, 1980, the metalworkers’ 66 names.233 As the list gives precise details of the activists’ work duties at the
union instructed the workers to stay at plant, there is no doubt that the information originated from Works Security. This
home, and not to set up any road blocks archived document does not, however, reveal whether the participating companies
(Arquivo Nacional [National archive], SNI, exchanged the names of the strike activists among themselves, or whether the
A 0065444). The originally reported figure list served as a ‘blacklist’ (“lista suja”) for the identification of employees with
of 130 dismissed employees was corrected politically unwelcome views.
down to 76 following a query to VW do Bra-
sil by the VW Personnel department (Memo Sauer’s appraisal that the metalworkers’ union was heavily Communist-
by the Personnel department for Briam, influenced, and was being misused for political purposes, was based on crude and
undated, in: UVW, Z 174, no. 2716/2). false political prejudice.234 In view of the rising inflation and the economic slow-
down resulting from the second oil price crisis, the union’s demand for a 15%
233 increase in real incomes was both bold and unrealistic, but was not based on left-
Suit filed by trade unionists against VW do wing political radicalisation. Lula and the majority of the union committee were
Brasil, September 2015. The document is not Marxists, and certainly not supporters of the illegal Communist Party (PCB),
in the records of the DEOPS (AESP, DEOPS, which had completely isolated itself politically by its criticism of the strike.
50C737/488 to 50C/37/504).
Sauer’s allegation that the union was being misused for political purposes ignored
234 the need for reform of employment laws and industrial relations in Brazil. As no
Sauer’s report to the VW AG management democratic workers’ party had yet been established since the beginning of the
board meeting on May 5, 1980, liberalisation of Brazilian domestic policy, the trade union movement had to itself
in: UVW, Z 1133, no. 6/2. take in hand the establishment of a workers’ party (Partido dos Trabalhadores –
PT) through the already legendary metalworkers’ union head Lula. The founding
235 of the PT in 1980 was based on the realisation that workers’ rights could only be
Sauer, “O homem Volkswagen”, p. 379. asserted through a twin strategy of trade union and party-political activism.

The reports on the progress of the strike in April/May 1980 significantly

damaged Sauer’s reputation among the employee representatives on the VW
AG supervisory board. At a Works Council meeting, IG Metall union committee
member Albert Schunk criticised Wolfsburg Sauer’s general attitude as “very
negative”, and demanded that the management board exert greater influence over
Sauer’s conduct. Conversely, in his memoirs published in 2012, Sauer blamed the
employee representatives on the supervisory board – and especially the IG Metall
union – for the fact that Carl H. Hahn rather than Sauer himself was appointed to
succeed Toni Schmücker as chairman of the management board in 1982.235

89
TH E STRI KES OF 1978, 1979 AN D 1980

This view is based on a number of assumptions which cannot be verified and 236
are not really plausible. Firstly, it cannot be determined whether the supervisory Memo by Klaus Brandes (VW Investments
board ever regarded him as a potential successor to Schmücker at all. Secondly, department) of a telephone conversation
Sauer had spent most of his career in Latin America. He was not familiar either with Nitzsche (VW do Brasil), February 9,
with the special characteristics of industrial relations at VW in Germany or with 1981, in: UVW, Z 1184, no. 156/2.
the German and wider European market. While Sauer proved his worth as a crisis
manager during the serious downturn in sales on the Brazilian auto market, 237
the management board in Wolfsburg identified deficiencies in the strategic Author’s interview with the former person-
management of VW do Brasil. It should be noted in this context, however, that nel director of VW do Brasil Jacy Mendonça,
the economic and political conditions in Brazil changed very much more rapidly March 29, 2017.
and radically than in Germany, and at the beginning of the economic crisis VW do
Brasil had to fundamentally revise its production planning four times in just four
months.236 Any medium-term strategic corporate planning had a very short half-
life under such circumstances. Sauer impressed his board colleagues and staff at
VW do Brasil, as well as his counterparts in the Brazilian government, through his
communications skills and charisma,237 but irritated his colleagues in Wolfsburg
with his authoritarian management style.

90
TH E STRI KES OF 1978, 1979 AN D 1980

91
9. Change in economic crisis:
the democratisation of industrial
relations at VW do Brasil
in the early 1980s

← Body shop in São Bernardo

do Campo, 1985

93
C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

The gradual transformation in industrial relations took place under increasingly 238
difficult economic conditions. Whereas the management board of VW do Brasil Analysis by the International Investments
had in fact had considerable financial scope to implement real pay rises in the department of the Brazilian government’s
labour dispute of 1979, by the Spring of 1980 its capacity to make concessions was economic policy measures 1979/80, June 2,
constrained. From 1980 onwards, VW do Brasil had little possibility of quieting its 1980, in: UVW, Z 1184, no. 390/1.
unhappy workforce by means of pay rises and retrospectively implementing the
withheld wage adjustments of the early 1970s. 239
Telex from Sauer to Schmücker, April 27,
The reason why VW do Brasil was now under financial constraints was the 1981, in: UVW, Z 174, no. 2716/1.
economic downturn, which was hitting Brazil more severely than Europe and
the USA. The Brazilian government and banking system had largely financed the
capital-intensive investments of the 1970s through loans from American and
European banks. In the 1970s and 1980s, Brazil’s energy supplies were mainly
based on oil imports, the cost of which rose sharply in 1979 and 1980 as a result
of the second oil price crisis following the Islamic revolution in Iran. As a result
of Brazil’s much worsened terms of trade (the ratio of import to export prices),
the balance of payments deficit widened, meaning that the country’s foreign debt
rose significantly. From 1980 onwards, the servicing of foreign debt (interest and
repayments) used up at least 70% of export revenues. This drove Brazil ever deeper
into the debt trap.

The Brazilian economy was additionally constrained by the high interest policies
of the US and British central banks. The British and US governments under Prime
Minister Margaret Thatcher and President Ronald Reagan were combating high
inflation with rigid monetarist policies. A major rise in the real interest rate slowed
money supply growth and reduced inflation, but had serious consequences for
countries with high levels of foreign debt such as Brazil. The interest burden on
the Brazilian economy and the rate of rise in indebtedness increased dramatically,
forcing the Brazilian government in 1981 to begin implementing a strict stability
policy which impaired economic growth.

In 1979, the Brazilian government was forced to start limiting the rise in fuel
consumption through higher taxes on car owners. The luxury tax on purchasing
a car was increased from 24% to 30%, and the one-off registration fee for a new car
rose from 3% to 7%.238 To cut the growth in credit, banks were allowed to finance
the purchase of a car for only 18 months instead of 24, and from 1980 onwards
even for as little as 12 months. Since most VW buyers were middle-class, and
reliant on partial credit finance, VW do Brasil’s car sales fell in 1980 for the first
time in its history, from 525,000 units to 514,000. Customers were even more
unsettled by the dramatically increasing petrol prices, which made running a

94
 C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

240 car much more expensive. The government-set petrol price increased more than
Analysis of the income statement by seven times over in the period from 1979 to 1981, rising from 9.60 Cruzeiros
VW AG financial director Thomée at the (equivalent to DM 0.78) to 66 Cruzeiros (DM 1.79) per litre. Even taking into
management board meeting on May 5, account the high inflation rates of 110% (1980) and 95.2% (1981), real petrol prices
1980, in: UVW, Z 1133, no. 6/2, Minutes of after allowing for inflation rose 68% in just two years.239
the management board meeting on May 5,
1980. While vehicle prices were increased In the heavily regulated Brazilian economy, cars were also subject to government
by 46.9% in 1979, material costs rose by price controls, which were tightened in 1979 under the impact of rising inflation.
50.5% and personnel costs by 62%, and the As the auto industry could only pass on its rising costs resulting from higher
inflation rate increased to 56%. material prices, wages and levels of depreciation to a limited extent, from 1978
onwards VW made losses on its normal business operations.240 In 1978 and 1979,
241 substantial net interest income from tax credits, supplier credits and government
Update planning for VW do Brasil for 1981 export financing credits cancelled out the losses on normal business operations,
to 1983, in: Minutes of the VW AG manage- enabling a small surplus to be generated.241 VW do Brasil was increasingly losing
ment board meeting on September 8, 1981, money as inflation doubled from 1979 (56%) to 1980 (110%). Bureaucratic review
Appendices, in: UVW, Z 1133, no. 28/2. The procedures meant that government approval to adjust vehicle prices lagged
interest rate on export credits in 1980 and several months behind increases in material prices and the workforce’s quarterly
1981 was 38% – 34% and 29% respectively inflation-adjusted pay rises.242 In 1980, VW do Brasil was able to increase its vehicle
below inflation. prices on the domestic market by 92%, while inflation climbed to 110%. The
abolition of price controls in December 1980 – long yearned-for and demanded
242 by the auto industry – came just as the dramatic recession was beginning, and too
Report by VW do Brasil management board late to improve company earnings.243
member Gerber at the VW AG manage-
ment board meeting on September 18, While VW do Brasil for the first time made a loss from its normal business
1980, in: Minutes of the management operations on the domestic market in 1980, exports of complete vehicles and
board meeting on September 18, 1980. CKD kits made a substantial profit. Positive factors influencing this were the
(UVW, Z 1133, no. 10/3) government’s high levels of export subsidy (26%) and the absence of price controls
on export markets. Since the government-controlled devaluation of the Brazilian
243 Cruzeiro (1980: 56.6%) was not keeping pace with the inflation rate (1980:
Update planning for VW do Brasil for 1981 110%), VW do Brasil was, however, coming under increasing cost pressures on
to 1983, in: Minutes of the VW AG manage- international markets.
ment board meeting on September 8, 1981,
Appendices, in: UVW, Z 1133, no. 28/2. The management board of VW do Brasil took Briam’s recommendation to
establish a Works Council to heart. Although the metalworkers’ union had initially
244 failed in its demand for Works Councils, VW do Brasil did not give up on the idea of
Employee representation at establishing a Works Council following the end of the strike in April 1980. By early
VW do Brasil S/A, September 10, 1980, September 1980, VW do Brasil had drawn up its own Works Council constitution.
in: UVW, Z 947, no. 274/1. It was thus the first Brazilian company to enable employee representation without
the imposition of a statutory Works Council constitution act.244

95
C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

Although the participation rights of the Works Councils lagged well behind 245
the employee rights enshrined in the German Works Constitution Act, union- Briam’s report to the VW AG supervisory
favouring VW personnel director Karl-Heinz Briam welcomed the “democratic board meeting on November 13, 1980,
experiment” as a step towards a standard of employee participation in in: UVW, Z 119, no. 451/1.
keeping with the developments in industrial democracy in Brazil.245 His
strategy of persuading the VW do Brasil management board of the benefits 246
of institutionalised employee representation through friendly but persistent Telex from Albert Schunk (IG Metall
encouragement had brought a first positive result. The employee representation committee) to Briam, September 16, 1980,
body was granted rights to be heard and make proposals on the core business in: UVW, Z 119, no. 451/1. See also the
matters of working times, work duration and conditions at the workplace. While it criticism by the IG Metall representatives
would be allowed rights of appeal in disciplinary matters, it was refused any right on the VW AG supervisory board at the
of co-determination in relation to recruitment and termination of employment. supervisory board meeting on November
13, 1980, and also the letter from Albert
The IG Metall union in Germany, however, regarded the parity of union-organised Schunk (IG Metall committee) to the
and non-union employees in the constitution of the employee representation General Works Council chairman Ehlers,
body as a failing.246 As the representatives of the two groups were elected through November 6, 1980, in: ibid.
separate lists, and union organisation of the workforce was already widespread,
the election rules resulted in permanent under-representation of union members. 247
The passive right to vote was restricted to employees with at least five years’ Telex from S. Rebhan (VW do Brasil Person-
uninterrupted service, meaning that workers who had been dismissed for political nel) to Ehlers, December 9, 1980,
reasons and subsequently reinstated were excluded from standing as candidates. in: UVW, Z 119, no. 451/1.
IG Metall expressed solidarity with the metalworkers’ union in São Bernardo do
Campo, which rejected the Works Council constitution for the reasons stated.

Reflecting its fundamental criticism of the constitution, prior to the Works

Council elections in December 1980 the metalworkers’ union called for employees
to spoil their ballot papers. The very high voter participation of 91% at the main
plant in São Bernardo do Campo demonstrated that Brazilian workers regarded
the establishment of a Works Council as a significant advance. Of the almost
32,000 votes cast, however, only 45.4% were valid; 12% submitted blank ballots.
20% of votes cast were invalid because they gave two votes to union members
and none to non-union employees, contrary to the election rules. 23% of voters
followed the union’s call to write “João Ferrador” [João the smith] on their ballots
as a protest against the election rules: João Ferrador was a popular cartoon figure
created by a committed metalworker who appeared regularly in the trade union
newspaper “Tribuna Metalúrgica”.247 The metalworkers’ unions at the new plant in
Taubaté (with 4,700 works entitled to vote) and the old branch plant in São Paulo
(3,000 voters) did not call for protests against the election rules. With comparably
high participation rates of 87% and 89% respectively, 82% and 87% respectively of
the employees submitted valid votes.

96
 C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

248 By establishing an employee representation body, VW do Brasil took a first step

Report by Briam on his trip to Brazil, towards a democratic corporate culture. However, the democratic legitimacy
in: Minutes of the management board of the new Works Council was impaired by the management’s insistence on
meeting on February 8, 1982, two separate candidate lists. Consequently, the Group management board in
in: UVW, Z 1133, no. 39/1; Sauer’s com- Wolfsburg had partially failed in its aim of creating a functional communications
ments during the management board channel between the management of VW do Brasil, the workforce and the union.
meeting on November 22, 1982, In the course of 1981, Sauer was forced to acknowledge that he could not weaken
in: UVW, Z 1133, no. 56/1; the union by the Works Council election procedure, and had to find a modus
Briam’s report to the management vivendi with the union which was acceptable for both sides. Briam was able to
board meeting on August 8, 1983, persuade him to abandon the fixed parity of union and non-union candidates and
in: UVW, Z 1133, no. 69/1 recognise the metalworkers’ union as an official collective bargaining partner.248

249 Behind the scenes, Karl-Heinz Briam was pursuing his efforts to bring about a
Sauer’s report to the VW AG management gradual democratisation of the corporate culture. The Catholic Church in Brazil
board meeting on May 5, 1980, played a key role as a dialogue partner and mediator between the trade unions and
in: UVW, Z 1133, no. 6/2. the companies.

250 Through its determined commitment to the preservation of human rights

“Der Spiegel” 16/1979, pp. 23f. and its public protests against arbitrary arrests and torture, the Catholic clergy
had further enhanced its social standing during the military dictatorship. Its
engagement on behalf of landless settlers who were denied rights, and its not only
charitable but also political support to the striking workers, imbued the Catholic
Church with a high degree of legitimacy as an advocate for the social interests of
the people.

Although the Catholic Church offered itself as a mediator between the company
and the unions, dialogue between VW do Brasil and the clergy was blocked by
some major issues in their relations. Wolfgang Sauer sharply criticised Archbishop
Arns and Bishop Hummes for what he regarded as their bias in favour of the
striking workers, and accused the Church of stirring up the political climate “in a
militant way”.249 Bishop Hummes occasionally employed Marxist terminology in
his public statements, which elicited highly negative responses from the inveterate
anti-Socialist Sauer. Sauer was not the only senior VW executive to be perplexed by
the Marxist influences in Hummes’s social and political views however. The Social
Democrat Briam shared Sauer’s mystification, as did German Chancellor Helmut
Schmidt, who – after a meeting with Hummes – said he had been reminded of the
Young Socialist movement within his own SPD party.250

97
C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

In addition to the obvious conflict of economic interests between Sauer and 251
the Catholic Church, the relationship was also strained by personal grievances. Sauer, “O homem Volkswagen”, p. 390.
The practising Catholic Sauer took the Bishops’ public criticism of the company There is some doubt about this depiction,
management’s conduct very personally. The question remains unanswered as to as Sauer’s own statements, and the reports
whether Archbishop Arns purposely ignored a personal letter from Sauer, and from his colleagues and staff quoted in
refused Sauer’s invitation to tour the plant with the categorical assertion that he his book, are often inaccurate in terms of
did not wish to betray the workers’ cause (Causa Operária - CO).251 timing and in a number of important cases
incorrect.
Since VW do Brasil and Archbishop Arns were unable to engage in dialogue on their
own initiative because of the hardened fronts between them, the Volkswagen AG 252
management board had to initiate the dialogue with the Brazilian clergy. Briam Letter from VW AG management board
recognised that VW do Brasil’s relationship with the Catholic Church was key to the member Frerk to Sauer, September 18,
company’s standing among the Brazilian public, and it was vital to improve it. The 1980, in: UVW, Z 1184, no. 57/1.
VW AG management board did assure VW do Brasil that it would not go over its
head to negotiate with church and union representatives in Brazil.252 In view of the 253
breakdown in dialogue with the Catholic clergy, however, the management board Telex from Cornelius Fetsch (managing
of VW do Brasil raised no objections to an initiative from Wolfsburg. The decisive director of the textile company Canda Inter-
push for dialogue with the Catholic Church in Brazil came from the chairman of national in Essen) to Schmücker, September
Germany’s Confederation of Catholic Business Leaders, who in October 1980 22, 1980, in: UVW, Z 1184/57/1.
arranged a confidential meeting of the management board with Arns and the
chairman of the Brazilian Bishops’ Conference Ivo Lorscheiter (1927-2007).253 254
The Confederation of Catholic Business Leaders and VW were pursuing the same Telex from Johannes Steller (chief executive
aims: searching for a way to ease the tensions in Brazilian society and establish a of the Confederation of Catholic Business
cooperative relationship between German companies, the Church and the trade Leaders) to Karl-Heinz Briam, October 9,
unions. 1980, in: UVW, Z 1184, no. 325/1.

On behalf of the management board, Briam and Otto Adams (head of International
Investments Department I) took the opportunity to hold a lengthy meeting with a
delegation of Brazilian Bishops at the Colégio Pio Brasileiro in the course of a trip
to Rome on October 11, 1980.254 No records remain of that meeting, so justifiable
supposition must be relied upon. As the meeting was also attended by several
members of the Confederation of Catholic Business Leaders and representatives
of Catholic charities, it is likely that Briam and the Brazilian Bishops discussed
the special circumstances at VW do Brasil only on its margins. It can be assumed
that discussions pertained to general matters of cooperation between business
and the Church, and mutual respect between capital and labour. The parties were
able to engage in intensive and in-depth dialogue, particularly since no translation
between German and Portuguese was necessary: Arns and Lorscheiter were the
descendants of German immigrants, and had both spoken German at home
during their childhoods. The meeting delivered a positive outcome from VW

98
 C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

255 AG’s perspective. In the Winter of 1980/81, Sauer began to engage in constructive
Letter from Adams (Investments Depart- dialogue with Archbishop Arns and Bishop Hummes which gradually built up a
ment I) to Sauer, January 12, 1981, relationship of trust.255 Sauer showed himself willing to learn, and promised
in: UVW, Z 1184, no. 356/3. them that the police would no longer be called to the plant in the event of labour
disputes.256
256
Verbal report by Briam on his trip to Brazil, The slowly emerging downturn in the Brazilian auto industry turned into a serious
in: Minutes of the management board recession at the beginning of 1981. VW do Brasil’s sales fell by 40% in just a few
meeting on February 8, 1982, months. The main cause was the sharp tightening of monetary policy, by which
in: UVW, Z 1133, no. 39/1. the Brazilian government was seeking to – and had to – slow the dramatic rise in
inflation and foreign debt. When the second oil price crisis hit during 1979, the
257 Brazilian Minister of Planning and the government’s economic policy chief Delfim
Minutes of the VW AG management board Netto initially went on the offensive, attempting to stimulate economic growth
meetings on March 14 (in UVW, Z 1133, no. through an expansive monetary policy. Netto’s economic policy was certainly not
61/1), May 30 (in UVW, Z 1133, no. 66/1), as unorthodox as it might seem from the perspective of neo-classical hegemonic
June 27 (in UVW, Z 1133, no. 68/1) and stability theory. German Finance Minister Hans Matthöfer opted to adopt the
August 8, 1983 (in UVW, Z 1133, no. 69/3). same approach.

The economic base conditions in Germany and Brazil were very different however.
While Germany was – and remained – a model of price stability, Brazil faced the
threat of sliding into hyperinflation. Germany’s trade surplus based on its export
strength meant that it did not have to worry about balance of payments issues,
but it was suffering from a fall in purchasing power and more expensive capital
investment due to imported inflation and rising real interest rates. While the
German economy gradually slipped into recession with a slight contraction in
economic output by 1982, after a further year of high growth (1980: 9.2%) Brazil
slumped into a three-year deep recession, during which the country’s gross
domestic prduct (GDP) fell by 7.4% overall from 1981 to 1983.

As an end to the recession came into sight during 1982, Brazil was confronted
by the Mexican debt crisis, entailing an international chain reaction and a
deterioration in its debt problem. Fearing that international credit lines might be
cancelled, in the Autumn of 1982 Brazil was forced to request the International
Monetary Fund (IMF) for billions in loans. The stringent stability conditions
imposed by the IMF forced the Brazilian government to implement a rigid stability
policy, with substantial spending cuts, limits on inflation-adjusted pay rises, the
abolition of price controls, and adherence to a high real interest rate. As producers
of consumer goods, VW do Brasil and VW AG naturally took a negative view of
the IMF’s conditions.257 Along with concerns about declines in sales, there were
worries of social unrest in Brazil, which were to be proved justified when a general

99
C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

strike was called. The negative impact of the IMF’s conditions on the economy 258
soon became apparent: In 1983 there was a double dip, which saw economic At an inflation rate of 24% (per quarter!),
output decline by 3.5%. credit volumes were only allowed to rise
by 5% (Telex from Sauer to Schmücker,
In view of Brazil’s sharply increasing foreign debt, and its declining credit- April 27, 1981, in: UVW, Z 174, no. 2716/1).
worthiness abroad, the Brazilian government had no choice but to reduce credit The government wanted to push growth
demand by strict rationing of loans, thereby pushing growth in money supply in money supply down to 50%, with an
well below the inflation rate.258 The approval of the credit interest rate with effect expected inflation rate of 80% (Report by
from the end of 1980 led to a dramatic rise in real interest rates to as high as International Investments Department I on
40%. As 70% of VW buyers financed their cars by loans, demand for cars dropped the economic situation in Brazil, May 14,
dramatically in January 1981. In Spring 1981, VW do Brasil held stockpiles of 1981, in: UVW, Z 1184, no. 356/1).
42,000 cars – a normal month’s production in the time before the crisis. VW do
Brasil’s production in 1981 fell by 42.4%, while its domestic sales even declined by 259
44.7%.259 The dramatic decline in sales came at a time when VW do Brasil believed VW do Brasil 1981 Annual Report,
itself to be well equipped for the future. In Autumn 1980, the company launched in: UVW, Z 610, no. 123/2.
the VW Gol, an in-house development which was intended as the successor to the
Beetle. 260
Response of the Investments department
The Brazilian auto industry had been developing an autonomous national to the article in “Der Spiegel” titled “Viel
strategy in the battle against dependency on oil and high oil prices since the zuwenig” [Much too little] (issue 10/1981,
mid-1970s. With the encouragement and financial support of the government, 2.3.1981), undated (March 1981), in: UVW,
the car manufacturers began developing ethanol-powered engines running on Z 1184, no. 356/2.
Brazil’s prime agricultural raw material, sugar cane. By 1980, the sugar cane and oil
industries had established a comprehensive production and distribution network 261
for ethanol/alcohol from sugar cane. Letter from Sauer to Netto, December 8,
1980, in: UVW, Z 1184, no. 356/1.
VW do Brasil succeeded in developing ethanol engines through to production
maturity just in time before the second oil price crisis hit. In Autumn 1980, 74% of
the company’s new vehicle deliveries featured ethanol engines, at prices identical
to the petrol-powered models.260 However, reports of possible ethanol supply
bottlenecks during 1981 significantly unsettled potential buyers. The percentage
of ethanol-powered cars from new production fell as low as 7% at one time in the
Summer of 1981, climbing back up to over 70% by the year-end. As VW do Brasil
had to adjust its engine production to major fluctuations in demand, Sauer even
requested Planning Minister Netto to set government-controlled production
figures for ethanol engines, which would have created greater calculability for the
manufacturers.261

100
 C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

262 VW do Brasil fell into a serious earnings crisis at a time when it needed to make
Memo by Carl Hahn concerning a extensive capital investment in new machinery and new products. While VW
­consultation at VW do Brasil, March 17, do Brasil has been able to get by with comparatively low levels of investment in
1982, in: Minutes of the VW AG manage- the golden years up to 1978, the need for high investment coincided with a loss
ment board meeting on March 29, 1982, of self-financing capacity. On his first visit to VW do Brasil in March 1982, new
in: UVW, Z 1133, no. 42/1. VW chairman Carl H. Hahn gained the impression that VW do Brasil had failed
to invest in cost-cutting production methods for its cash-cow, the Beetle.262 It
263 pointed out as disadvantageous the fact that VW do Brasil was not yet able to
Submission by Geßner for Berthold, produce a state-of-the-art water-cooled engine for the new Gol. The first Gol model
August 20, 1981, featured the old air-cooled 1.3 litre petrol engine from the Beetle, which was
in: UVW, Z 1184, no. 361/2. sharply criticised in the Brazilian press for its low power and disproportionately
high fuel consumption. A few months after launch, VW do Brasil replaced the 1.3
264 litre petrol engine by a more powerful 1.6 litre petrol engine and a 1.3 litre ethanol
Sauer’s report to the VW AG management engine. Because of the significant conversion cost, the Gol – which was actually
board meeting on September 18, 1980, intended as a future cash-cow – incurred heavy losses in its first year, producing a
in: UVW, Z 1133, no. 10/3. negative return on sales of 12% to 17%.263 A similar problem was posed by the VW
Transporter (Type 2), which in 1981 was available only with a thirsty petrol engine,
265 and did not yet have an ethanol-engined variant.264 As the government prohibited
VW do Brasil 1981 Annual Report, the fitting of diesel engines in light commercial vehicles in line with its energy
in: UVW, Z 610, no. 123/2. policy, retrofitting the German-developed diesel engine was not an alternative.

266 For the first time since its founding, VW do Brasil was sliding into potentially
Minutes of the VW AG management hazardous debt because of the sharp decline in sales and the extremely high
board meeting on September 20, 1982, interest rates. While the company’s liabilities to banks at the end of 1980 totalling
in: UVW, Z 1133, no. 53/1. 7,739 million Cruzeiros (DM 236.6 million) could still be deemed reasonable, by
the end of 1981 they had reached the equivalent of DM 473.2 million.265 More
267 hazardous was the heavy loss of 18,469 million Cruzeiros (DM 333.5 million),
Minutes of the VW AG management which substantially reduced liquidity and also cut the shareholders’ equity.
board meeting on September 8, 1981, Based on German accounting standards, the loss was even equivalent to DM
in: UVW, Z 1133, no. 28/1. 452 million.266 For the first time in the history of VW do Brasil, fixed assets
exceeded shareholders’ equity – a sign that the business was undercapitalised.267
268 In November 1981, VW AG and the two minority shareholders – the Brazilian
Report by VW finance director Thomée to Monteiro group and the state of Kuwait, holding 10% each – had to inject US$
the management board meeting on June 100 million of equity, among other reasons in order to reduce the high cost of
10, 1981, in: UVW, Z 1133, no. 22/2. borrowings at an interest rate of 11% (per month!).268

101
C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

The small profit made the following year, 1982, stopped VW do Brasil from eating 269
up any more equity, but brought no major relief from the high finance costs. The Analysis of 1982 results, in: Minutes of the
small rise in production was not sufficient to cut the overhead cost per vehicle and management board meeting on June 27,
achieve cost-effective utilisation of capacities at the three plants in São Bernardo 1983, in: UVW, Z 1133, no. 68/1.
do Campo, Taubaté and São Paulo.269
270
The dramatic collapse in sales since Autumn 1980 was to place a heavy strain on Telex from Sauer to Schmücker, April 27,
the tentative emerging dialogue between the management and the union. As 1981, in: UVW, Z 174, no. 2716/1. Parts of
a result of severe over-capacity in production and the essential need to reduce this telex were leaked to “Spiegel” maga-
variable costs, in the Spring VW do Brasil made 8,500 people – a fifth of its total zine, and so made public (“Linha Dura”,
workforce – redundant. For the employees, these mass redundancies had dramatic in: “Der Spiegel” 28/1981, pp. 62f.).
consequences which went beyond the loss of a job and the impending termination
of unemployment insurance.270 They received just one month’s pay from the 271
state-administered Redundancy Guarantee Fund (Fundo de Garantia do Tempo Letter from Forjaria São Bernardo S.A. to
de Serviço - FGTS) for every year of service at VW. As there was no adequate state Gerber (VW AG, International Investments),
health insurance scheme at the time, on losing their employer’s health insurance August 27, 1981,
they also lost their insurance cover in case of sickness. Compensatory benefit in: UVW, Z 1184, no. 361/2.
schemes covering mass redundancies were a rarity in Brazilian industry, and there
was no provision for any such entitlement under Brazil’s employment laws. 272
Santos Barbosa, “Sindicalismo em tempo
The dramatic wave of redundancies by the auto manufacturers and their de crise”, pp. 112f.; also “Campanhia Vale
component suppliers saw the unemployment rate in the São Bernardo do Campo do Rio Cristalino”,
region rise to 13%.271 Concerned about social unrest and a potential resultant in: UVW, Z 174, no. 2716/1.
political uprising, the management board of VW do Brasil was keen to avoid
further mass redundancies as far as possible. The potential alternative of short-
time working was doomed to failure because of the lack of a state employment
guarantee fund and restrictive employment laws. In view of the dramatic 40%
decline in sales, the maximum permissible 25% reduction in working time was
not sufficient to adjust work capacity to demand. Since the state Redundancy
Guarantee Fund did not provide assistance to workers on short-time working
schemes, the workers on the lower pay scales were threatened with major cuts to
their real incomes.

Nevertheless, the management board proposed to the employee representation

body and the metalworkers’ union a plan for short-time working and a bar
on further redundancies. While the pro-employer majority on the employee
representation body agreed to the short-time working plan, the union insisted
on a job guarantee. In the mass vote on the short-time working plan, 70% of the
employees at the main plant in São Bernardo do Campo followed the union’s
recommendation and categorically rejected short-time working. The union’s

102
 C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

273 rejection was based primarily on a lack of trust in VW’s promise to extend the bar
Letter concerning redundancies from Mário on redundancies beyond the three-month term of the agreement.272 The change in
Garnero to Sauer, April 27, 1981, in: UVW, course by the management board was still too fresh, and as yet too tentative, for
Z 174, no. 2716/1 (in the Portuguese orig- trust in it to have built up on the part of the union and the workforce.
inal: “inoportuna e inadequada”). See also
his memoirs, “Jogo Duro”, São Paulo 1988, The situation took an unexpected turn on April 27, 1981 when the Brazilian legal
pp. 137-141, and his interview in “A Folha affairs director Mário Garnero resigned in protest at a planned additional 2,000
do São Paulo”, July 20, 1981 (excerpts from redundancies and made the reasons for his resignation public in the Brazilian
which were quoted in a telegram from VW press. Garnero, who was also chairman of the Brazilian auto industry association
do Brasil to Anton Konrad of the VW AG (Associaçao Nacional dos Fabricantos de Veículo Automotores – ANFAVEA),
Public Relations department, July 20, 1981, regarded further mass redundancies as “wrong and inappropriate” for Brazilian
in: UVW, Z 174, no. 2716/1). society, and rejected them because of their negative impact on the economic policy
of the Figueiredo government.273 In his position as chairman of the auto industry
274 association, Garnero had a conflict of interests with his loyalty to VW. Whereas
Press statement by Garnero on his resigna- VW do Brasil was seeking to use all legal means to adjust its personnel costs to
tion, undated (April 27, 1981), in: UVW, falling revenues, the association’s interest was in reaching a consensus with the
Z 174, no. 2716/1. Sauer believed that Gar- government. Moreover, Garnero predicted that additional mass redundancies
nero had selfish political motives for his ac- would cause considerable damage to the image of foreign companies such
tion, in that he was looking to be appointed as VW.274 Garnero was to be proved right in that prediction. Brazil’s President
Industry Minister following an expected Figueiredo summoned Sauer to meet with him, and criticised the redundancies at
victory for the opposition MDB party in the VW on television. In view of the high profits it had made in the past, he asserted,
upcoming parliamentary elections (Letter VW should remember its obligations to Brazil in bad times too.275
from Sauer to Schmücker, May 11, 1981,
in: UVW, Z 1184, no. 356/1). The VW do Brasil management board had to take the President’s criticism
seriously. This moral suasion concealed substantial potential for the government
275 to exert pressure, extending from price controls, through import licensing, to
UVW, Z 174, no. 2716/1; “Linha Dura”, export subsidies. At the urging of the Governor of São Paulo state, the four biggest
in: “Der Spiegel” 28/1981, pp. 62f. auto manufacturers undertook not to make any more mass redundancies, initially
until November 1981. In return, despite tight budgets, the Brazilian federal
276 government promised to continue subsidising exports.276
Telex from Sauer to Schmücker, August 19,
1981, in: UVW, Z 174, no. 2716/1. At the same time, there were signs of a cautious thawing of relations between
the VW do Brasil management board and the metalworkers’ union. It did not
277 escape the attention of VW do Brasil’s head of Public Relations that Lula, at a
Telex from Walter Nori (VW do Brasil head gathering outside the VW factory gates in July 1981, acknowledged the difficult
of Public Relations) to Anton Konrad (VW situation in which the auto industry found itself and moderated his formerly
AG head of Public Relations), July 28, 1981, radical rhetoric.277 Around the same time, in an article on VW the daily newspaper
in: UVW, Z 174, no. 2716/1. “O Estado do São Paulo” published the contents of an in-house memo which
the company had evidently leaked purposely to the press. In it, VW do Brasil
stated that it was open to suggestions for ways to avoid redundancies, and that

103
C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

it regarded redundancies only as a last resort.278 This was the Public Relations 278
department’s response to a speech by Lula at a demonstration reporting that VW “O Estado do São Paulo”, July 23, 1981,
was planning 7,000 redundancies. in: ibid. Original text: “(...) sinceramente
gostoriamos de encontrar uma soluçao que
By this time, the board had agreed on a benefits package for employees taking evitasse a medida extrema da demissao
voluntary redundancy. On July 31, 1981, the management made the workforce an e (...) sempre estivemos e continuamos
offer of three months’ pay for employees taking voluntary redundancy in addition abertos a sugestoes.”
to their statutory severance payment. Anyone taking up the offer would retain their
entitlement to company medical care for themselves and their families through 279
to the end of the year, and would be able to shop in the company’s Cooperativa Telex from VW do Brasil to the VW AG Inter-
store until August 15, 1982.279 This offer was also agreed by the union, and was national Production department, August 3,
greeted positively by the employees. In August 1981 alone, 3,350 workers took 1981, in: UVW, Z 1184, no. 361/2.
voluntary redundancy.280 This enabled VW do Brasil to completely eliminate its
workforce surplus of 4,300 staff (as per June 1981) by the year-end, and during the 280
slight economic recovery in 1982 was able to re-employ 2,500 of the workers who Minutes of the VW AG management
had left.281 board meeting on September 8, 1981,
in: UVW, Z 1133, no. 22/2.

281
Minutes of the VW AG management
board meeting on June 10, 1981,
in: UVW, Z 1133, no. 22/2.

104
C H A N G E I N E C O N O M I C C R I S I S : T H E D E M O C R AT I S AT I O N O F I N D U S T R I A L R E L AT I O N S
AT V W D O B R A S I L I N T H E E A R LY 1 9 8 0 S

105
10. VW do Brasil as a major
land-owner, and the social and
ecological consequences:
the Rio Cristalino project

← Fazenda Rio Cristalino, 1980

107
VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

At the high-point of the boom in the Brazilian auto industry in the early 1970s, 282
VW do Brasil faced the challenge of having to re-invest the non-transferable Briefing by VW AG Investments Depart-
portion of its profits in Brazil. Since VW do Brasil was already financing its capital ment I, May 26, 1981, in: UVW, Z 1184,
investments from retained earnings, re-investment in the business could not no. 361/2. The recently published book by
resolve the luxury problem of the appropriation of profits. Antoine Acker, “Volkswagen in the Amazon:
The tragedy of global development in Mod-
The strategy of acquiring component suppliers was contradictory to the corporate ern Brazil”, Cambridge 2017, is fundamen-
principles of VW AG, and would also have been barely feasible on the Brazilian tal to any study of the history of the Rio
market. Many of VW do Brasil’s suppliers, such as Bosch and Krupp, were Cristalino project.
themselves subsidiaries of German companies, and would certainly not have
been open to acquisition. Consequently, VW do Brasil invested a portion of its 283
non-transferable surplus in shares of 100 Brazilian companies in a wide variety Telex from Sauer to Leiding, September 26,
of different sectors. As VW do Brasil was only able to acquire holdings of a few 1973, in: UVW, Z 174, no. 577/1.
percent, these investments provided it with no influence on the management of
ongoing business operations or on the strategic development of the companies 284
concerned.282 Submission by VW do Brasil for the VW AG
management board secretariat, September
VW do Brasil therefore looked for investment opportunities through which it 24, 1973, in: UVW, Z 174, no. 577/1; report
could have control over developments. One such opportunity arose in September by International Investments Department I,
1973 when the state development corporation Codespar offered a 58,000 hectare May 26, 1981, in: UVW, Z 1184, no. 361/2.
ranch (fazenda) in the south-east of Pará state in the Santana da Araguaia district
at a price of 28 million Cruzeiros (DM 11 million), with the option of expanding
the estate to 241,000 hectares through the additional purchase of two adjoining
parcels of undeveloped land.283 As part of its highly ambitious development
programme for the under-developed north and north-east of Brazil, the
government and the state agency for the development of the Amazon region
(Superintendencia do Desenvolvimento da Amazonia – SUDAM) were seeking
investors with major capital resources to invest in large-scale agricultural projects.
To that end, in August 1973 Planning Minister Reis Velloso invited chairman of
the management board Wolfgang Sauer to join a trip to the northern region for
potential major investors.

The Planning Ministry tried to attract investors with an offer to allow financing of
the additional land purchases and a major portion of the total investment from
non-transferable tax refunds.284 The management board expected a purchase
price of 56 million Cruzeiros (DM 22.2 million) for the land and an additional
investment cost of 270 million Cruzeiros (DM 106.6 million) to transform the
largely undeveloped forest area into a gigantic fazenda three times the size of
Hamburg. On full development, VW expected to be able to keep between 150,000
and 200,000 beef cattle on the land.

108
 VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

285 Despite the gigantic scale of the estate and the Group’s total lack of experience
Press statement by Wolfgang Sauer, April with agricultural projects in tropical regions, the management boards of VW do
1983, in: UVW, Z 368, no. 193/1. Concern- Brasil and Volkswagen AG saw it as a highly advantageous way of investing profits
ing his subsequent interpretation of the based on the associated tax breaks. As the Brazilian government charged advance
project see Sauer, “O homem Volkswagen”, payments on as yet untaxed income, the tax refunds were also a tax-free source
pp. 342-353. of financing for capital investments. At the time, VW do Brasil was forecasting
long-term high profits, resulting in high tax bills, so the opportunity to finance
286 investment from untaxed income was attractive. Contrary to the justification
Telex from Sauer to Leiding, September 26, strategy subsequently employed by chairman of the management board Wolfgang
1973, in: UVW, Z 174, no. 577/1. Sauer, social considerations played no role in the investment decision.285

287 Alongside the tax advantages, there was also a political reason to invest in land
Letter from Sauer to Leiding, July 16, 1973, in the under-developed north of Brazil. The chairman of the management board
in: UVW, Z 174, no. 577/1. of VW do Brasil also persuaded his colleague Leiding with the indication that
the Planning Minister had hinted at the prospect of “substantial and exceptional
288 goodwill” on the part of the government towards VW do Brasil if it made the
Minutes of the VW AG management investment.286 Sauer believed that VW do Brasil should curry favour with the
board meeting on October 5, 1973, government by helping it to “attain its economic policy aims (...) in order to
in: UVW, Z 1133, no. 288/5. resolve the country’s social problems”.287 The aims of the military government
included not only consistent high rates of growth in industrial production and
289 employment, but also the agricultural development of the savannah forests and
Investment plan of VW do Brasil, approved tropical jungles in northern Brazil. The development of the Amazon region and
by SUDAM on December 20,1974 the savannah to the south, including the colonisation of those territories by
(in UVW, Z 174, no. 2716/1). family farms and fazendas, was also an agricultural policy aimed at compensating
for a failure to undertake land reforms which would have turned rural workers and
settlers into the legal owners of unused estates, thereby resolving the agricultural
problem as a social problem. The military coup had been carried out, not least,
in order to oust the Goulart government because of its land reform plans, and
as such had consolidated the convergence of interests between the military and
agricultural elites.

On October 5, 1973, the VW AG management board approved the land purchase

in northern Brazil, overriding the concerns of personnel director Peter Frerk.288
In June 1974, VW do Brasil submitted its investment plan to the SUDAM, which
granted its approval in December 1974.289 In its decision to make the purchase,
the management board relied entirely on the recommendations of VW do Brasil
and on a consultant’s survey – not explained in detail – which affirmed the
profitability of the purchased land. Neither VW AG nor its Brazilian subsidiary had
any agriculturally sound and commercially costed plan at the time the purchase
was made indicating whether and how the ambitious and gigantic undertaking
could be realised.

109
VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

It is unlikely that the decision-makers in Wolfsburg and São Bernardo do Campo 290
were aware of the failure of a large-scale investment by Ford in the Amazon. By 1981 VW do Brasil had had to
During the Second World War, the Ford corporation had acquired a massive area increase its share-holding to 27.8%
of land for the plantation of rubber trees, establishing on it a worker’ settlement (see UVW, Z 1184, no. 356/1).
which it named Fordlandia. The Fordlandia project failed because the cleared
jungle floor quickly became infertile, and the yields from the plantation fell well 291
below expectations because of the poor fertility of the soil and rapidly spreading VW do Brasil 1977 Annual Report,
crop diseases. in: UVW, Z 319, no. 1/8312.

VW do Brasil was entering entirely new country in establishing the fazenda, 292
and was not able to rely upon assured empirical data based on experience. The This is a minimum amount, calculated on
management nevertheless considered the investment in the future fazenda of the basis of the Cruzeiro exchange rate at
Rio Cristalino to be free of risk. The clearing of trees and seeding of grass to feed the end of 1978. As the investment was
beef herds were long-practised cultivation techniques among Brazilian fazenda spread over a period of four years, and
owners. There is, however, some evidence that the management board of VW do the Cruzeiro lost 64% of its value against
Brasil significantly underestimated the development and cultivation costs and the the Dollar during that time, the cost in
cost of processing and marketing the beef. For example, the board had not initially Deutschmarks was about two thirds (DM
calculated the extreme remoteness of the location in the thinly populated south 15 million) higher (figures based on the
of Pará state into its investment plan. The fazenda was 800 kilometres away from brochure: “VW in Brasilien” [VW in Brazil],
the nearest major cities and selling markets in Belem and Brasilia. Lacking any 1979).
infrastructure for slaughtering and processing beef cattle, VW do Brasil was forced
to take a 22% share-holding in slaughterhouse and cold-store operator Frigorifico
Atlas S.A.290 The company, established by the Hamburg-based Heinrich Plambeck
corporation, constructed a slaughterhouse with annual capacity for 150,000 beef
cattle 70 kilometres away from the fazenda in the newly created town of Campo
Alegre.

At the start of the project, VW do Brasil significantly reduced the scale of the
planned fazenda. The land acquired in 1974 totalled 140,000 hectares rather
than 241,000, and was intended to feed 110,000 beef cattle. The government
had stipulated that half of the land had to be left in its original natural state.
Accordingly, VW was able to clear 70,000 hectares – an area the size of Hamburg.
The 1977 VW do Brasil Annual Report stated that, on completion of clearing in
1987, the new pastures would feed 110,000 beef cattle, meaning approximately 1.5
animals per hectare.291 The clearing of forest and seeding of grass for pasture took
longer than planned however. In 1978, four years after the start of the project, only
20,000 hectares of pasture had been developed for beef cattle grazing. By then, VW
do Brasil had invested at least DM 22 million and an estimated DM 37 million.292

110
 VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

293 When purchasing the land, the VW do Brasil management had relied on its
Internal information on Rio Cristalino, ability to exploit the statutory provisions in full and to clear half the land (70,000
as per April 30, 1982, hectares) and turn it into pasture. As part of the land was hilly and unsuitable for
in: UVW, Z 174, no. 1028/22. pasture, VW was forced to reduce the planned pasture area from 70,000 hectares
to 53,700.293 The prediction that one steer would need 0.66 hectares of pasture
294 also proved overly optimistic. Because of the four-month dry season in Winter,
Memo of a meeting with members the grass grew more slowly and was less nutrient-rich than expected. From 1979
of the VW do Brasil management board onwards, a pasture requirement of one hectare per steer proved realistic. This
in Wolfsburg, May 21, 1979, reduced the realistic cattle capacity of the fazenda from 110,000 to 54,000. Such
in: UVW, Z 1184, no. 355/2. a major change to the fundamental parameters altered expectations as to the
fazenda’s profitability very substantially.294 As the number of cattle had reached
295 only 40,000 by 1983, VW do Brasil could not expect to start returning a profit until
Ariane Barth, “Aufbruch zur letzten Grenze” the early 1990s.295
[Heading towards the final frontier],
in: “Der Spiegel” 42/1983, pp. 230-247. The management board of VW do Brasil and its consultants had appraised the
geographical, climatic and ecological factors far too optimistically. The basic
296 parameters for the long-term profitability of the fazenda changed to become
Concerning the natural history aspect of negative. The estate manager, Swiss doctor of tropical agriculture Andreas
the project see Antoine Acker, “O maior Brügger, placed his hopes in the scientific optimisation of cattle farming. Though
incendio do planeta: Como a Volkswagen e the traditional Brazilian Nelore beef cattle were robust, adapted to the tropical
o regime militar brasileiro acidentalmente climate and needed little care, they were also inefficient processors of feed, with
ajudarem a transformar a Amazonia em a low meat yield. Through a joint project launched in 1979 with the University
uma arena politica global”, in: Revista of Veterinary Medicine Hannover, Brügger hoped to breed a European/Brazilian
Brasileira de Historia 34 (2014), pp. 13-33; hybrid which would produce more meat while retaining the same adaptability
idem, “‘The brand that knows our land’: to tropical conditions. His failed hope was based on the scientistically optimistic
Volkswagen’s ‘Brazilianization’ in the ‘Eco- assumption that such a breed was viable. Yet even if he had been successful, the
nomic Miracle’“, 1968-1973, in: “Monde(s)” multi-generational proliferation of an entirely new breed of beef cattle would have
2014/1, pp. 197-218. taken a very long time.296

297 The management of the fazenda only gradually became aware of the ecological
Letter from Dr. R. Binsack (GTZ, Gesellschaft problems and the limits on sustainable pasturing. Following a visit by a
für Technische Zusammenarbeit) to Alwin consultant from the German government development agency GTZ in April
Dierkers (VW do Brasil), August 20, 1979, 1979, Brügger was forced to admit that “our pasture management is still far from
in: UVW, Z 1184, no. 389/2; letter from being optimal. We are going to need many years’ more experience.”297 Yet even
Brügger to the GTZ, September 24, 1979, after the introduction of a computer-controlled pasture management system,
in: UVW, Z 1184, no. 389/2. he still predicted one steer per hectare as the maximum sustainable capacity of
the land. Excessively intensive pasturing posed a risk of soil erosion, and thus
the permanent destruction of the ground, without knowledge of the limits of
pasturing.

111
VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

It was the ambition of the VW do Brasil management board to construct a 298

model settlement in the centre of the fazenda for its 300 permanent workers. According to the article by Brazilian jour-
The development agency SUDAM also regarded the Rio Cristalino fazenda as a nalist Sergio Buarque on the Rio Cristalino
298
model estate which was to serve as an example to other investors. The solidly fazenda in: “Movimento”, June 26, 1978.
built houses for the estate workers and their families were connected to the
power grid and water supply system, and so better equipped than on other 299
fazendas. The settlement’s communal facilities included a primary school for Suit filed by the Delegacia Regional de
the first to fourth grades, a food cooperative, a community hall with a stage, and Trabalho no Pará and the agricultural work-
a medical centre. It thus offered a much better social infrastructure than many ers’ trade union against the Rio Cristalino
rural workers’ settlements in the poor north of Brazil. As the price for their good fazenda, September 26, 1984, in: Arquivo
living conditions and the exemplary infrastructure, the workers had to accept a Nacional Brasilia, Serviçio Nacional de
high degree of social control by the estate management. A critical and thoroughly Informaçoes (SNI), K0048446. Reports on
researched article in the magazine “Movimento” reported in 1978 that the head of the working conditions of the permanent
estate security routine placed the workers under surveillance, and strictly enforced estate staff and itinerant workers also
the alcohol ban for estate workers imposed by VW. The settlement community appeared in “Spiegel” magazine issue
and the relatively small number of workers allowed estate manager Brügger to 42/1983, the “Frankfurter Rundschau” and
implement the typical VW do Brasil model of authoritarian paternalism in an the “Times” on May 10, 1983.
ideal way. That authoritarian paternalism was symbolised in the fazenda’s school,
which was named after company chairman Wolfgang Sauer and had a picture of 300
him hung on the wall. According to the VW do Brasil 1981 Annual
Report, in: UVW, Z 610, no. 123/2.
As opposed to other farm workers, the workers on the Rio Cristalino estate were
employed on a permanent basis, and paid all year round. Little information is
available about the working conditions of the permanent estate workers, as the
Catholic Rural Pastoral Commission (Commissao Pastoral da Terra – CPT) was
primarily concerned with assuring humanitarian working conditions for the
non-permanent itinerant workers. A report by the regional employment office
and the agricultural workers’ trade union in September 1984 stated that the
fazenda offered good working conditions for its regular staff.299 However, the
workers were also exposed to serious, but avoidable, healthy risks because the
estate management used defoliants containing the highly toxic dioxin-containing
agent 2,4,5-T (also known as “Agent Orange”) in its clearing operations. There
are unfortunately no surviving reports concerning the extent to which fire was
employed for clearing in order to destroy as much as 6,000 hectares of forest
every year. The fazenda burned the waste wood in the on-site power generator,
and a sawmill processed usable wood into planks, so the small amount of lumber
produced was largely recycled.300 However, the non-recyclable forest vegetation
was still being burned even when the harm to the climate caused by clearing by
fire was already generally known.

112
 VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

301 The biggest social failing of the fazenda was the treatment of the non-permanent
Article headlined “Sklavenhaltung für estate workers who were engaged to carry out clearing operations. There are only
VW-Werk?” (Slavery for VW plant?) sporadic reports as to the average numbers of non-permanent itinerant workers
in Frankfurter Rundschau, May 10, 1983 on the fazenda. Press reports based on reports from the agricultural workers’ trade
(UVW, Z 368, no. 193/1). union and the Catholic Rural Pastoral Commission talk of approximately 600
itinerant workers during the early 1980s.301 To recruit staff, the fazendas employed
302 private agencies, who were officially termed empreiteros (contractors) but
According to the detailed statements of colloquially were referred to as gatos (cats). The gatos mainly recruited unskilled,
itinerant workers in “Brasilien-Nachrichten” often illiterate, workers who were forced to take on any work, however badly
84/1984. The itinerant workers’ statements paid, in order to survive in the poverty-stricken north of Brazil. In the very thinly
were collated and publicised by Father populated rural areas, landless workers mostly had no alternative other than to
Ricardo Rezende from the Catholic Rural live as itinerant workers. Most of them had neither a tax reference number nor
Pastoral Commission. a work book, which were obligatory in order to obtain regular employment. The
hopeless social situation of the unskilled rural workers allowed the gatos and their
commissioning estate owners to dictate the workers’ pay and working conditions.
In fact, the itinerant workers did not even receive boots or work clothing from the
gatos. While the living conditions of the permanent fazenda workers were good,
the itinerant workers were housed only in poorly roofed wooden sheds with no
sanitary facilities. As the VW fazenda accepted no responsibility for housing or
feeding the itinerant workers, they had no alternative but to buy their food at
overpriced rates from the gatos.

The working conditions of the itinerant worker were heavily dominated by

violence. The gatos were armed, and often enforced the fulfillment of work
contracts through the deployment of armed guards (pistoleiros). If itinerant
workers sought to leave the estate because of their low pay and unreasonable
working conditions, they were forced back to work by the pistoleiros at gunpoint,
or were tied to trees after trying to escape. Among the preferred victims of the
gatos were indebted itinerant workers, whose debts they took on. As little money
remained from their wages to pay off the debts after deducting the price of their
food, indebted itinerant workers were effectively forced into long-term indentured
servitude. German news services covering Latin America such as “Brasilien-
Nachrichten” condemned these working conditions as a form of slavery.302 While
the condemnation of the living conditions of rural workers accurately portrayed
the social repression and exploitation involved, the metaphorical use of the term
‘slavery’ did not reflect the reality. Indebted rural workers were entirely dependent
on the gatos economically and under employment law, but they were neither their
property nor their serfs.

113
VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

According to a report by the Pará state employment office, the treatment of 303
the itinerant workers on the fazenda Rio Cristalino did not differ from the Quotation from the report: “A situaçao
working conditions on other fazendas.303 The employment office thus affirmed encontrada na Vale do Rio Cristalino é
the complaints of the Catholic Rural Pastoral Commission concerning the um retrato de todas as outras fazendas
exploitation of the itinerant workers, which in 1983 were made public in Brazil existentes na regiao, onde o trabalhador
through reports in the Brazilian daily newspapers “O Globo” and “Journal de humilde e analfabetico é uma presa fácil
Tarde”, and also reached German readers via the AFP news agency and the para os empreteiros, muitas das vezes com
“Frankfurter Rundschau” newspaper.304 Father Ricardo Rezende visited Germany a complacencia dos próprios donos das
in October 1985, and gave a critical audience at a conference hosted by “Brasilien- fazendas.” (Translation: The situation on
Nachrichten” in Freiburg a first-hand report on conditions in northern Brazil in the Vale do Rio Cristalino fazenda replicates
a presentation titled “Mitverantwortung ausländischer Unternehmen – Sklaverei conditions on the other fazendas in the re-
auf der VW-Farm?” [Shared responsibility of foreign companies – Slavery on the gion, where the poor and illiterate workers
VW estate?]. are easy prey for the recruitment agents,
often with the indulgence of the fazenda’s
The management of the VW fazenda was doubtless familiar with the conditions true masters), in: Suit filed by the Delegacia
on the rural labour market, and knew of the exploitation being practised by the Regional de Trabalho no Pará and the
gatos. By engaging the gatos as intermediaries, the fazenda management cut agricultural workers’ trade union against
its administrative and labour costs at the expense of the itinerant workers. The the Rio Cristalino fazenda, September 26,
management regarded, and treated, the itinerant workers as second-class workers. 1984, in: Arquivo Nacional Brasilia, Serviçio
They failed to provide them with appropriate accommodation, sanitary facilities, Nacional de Informaçoes (SNI), K0048446.
or medical care, and even prevented them from shopping in the fazenda’s own
food store. They even deducted part of their wages if they made mistakes in their 304
work or were negligent when removing toxic crops.305 Instead of treating the Overview of reporting by the Brazilian
itinerant workers fairly, they aided and abetted the gatos. press in a fax from VW do Brasil to VW
AG, undated (May 1983), in: UVW, Z 368,
The management of the fazenda and VW do Brasil – if not directly, then indirectly no. 193/1. The São Bernardo do Campo
– shared responsibility for the inhumane working and living conditions of the metalworkers’ union newspaper Tribuna
itinerant workers. As the clearing operations ran for a long period of time, and Metalurgica disclosed the situation to the
the itinerant workers were not merely engaged on a short-term basis, the fazenda VW workforce in its May/June 1983 issue.
could have employed them itself, establishing a model of best practice. Since
1983, German news magazines and national newspapers such as “Der Spiegel” 305
and “Frankfurter Rundschau” had been accusing VW of employing “slave labour”, Sergio Buarque, “A capitania da
although the term was not really accurate. Even if the itinerant workers were not ­Volkswagen”, in: “Movimento”,
really slaves, and VW do Brasil was not directly responsible for their appalling June 26, 1978.
working conditions, VW did nothing to alleviate their situation.

As environmental awareness grew in Germany and globally, there was increasing

public interest in the large-scale deforestation of the Amazon. In February 1984,
an article in “Geo” magazine mentioned the VW fazenda as an example of the
destruction of tropical jungles. In a paper intended for school course-work titled

114
 VW DO BRASIL AS A MAJOR LAND-OWNER, AND THE SOCIAL AND
E C O L O G I C A L C O N S E Q U E N C E S : T H E R I O C R I S TA L I N O P R O J E C T

306 “Brasilien, Herausforderung an die Kirche” [Brazil – challenge to the church],

Letter from Bernhard Grzimek Catholic charity Misereor reported not only human rights violations and social
to VW AG, October 12, 1979, repression but also – based on the example of the Rio Cristalino fazenda – on
in: UVW, Z 1184, no. 390/3; the destruction of the jungle. Media reports on clearance operations on the
letter from VW AG to Grzimek, ­October 23, VW fazenda induced prominent animal film-maker and zoo director Bernhard
1979, in: UVW, Z 174, no. 2716/2. Grzimek to write a letter to the VW board in Wolfsburg expressing his concern
in October 1979.306 VW AG assured Grzimek that the company was aware of the
307 ecological consequences, and was countering the risk of soil erosion by seeding
VW do Brasil, “Cristalino: Eine Rinderfarm grass. No ecological masterplan to mitigate the negative consequences for the
im Neuen Viehzuchtgebiet” plant and animal world existed at the time however. Ultimately, it was only
[Cristalino: a cattle ranch in the new the in parts hilly terrain which prevented VW do Brasil from attaining the high
breeding t­ erritory], Wolfsburg 1983, legal maximum and clearing 50% of the land. To counter the increasing public
in: UVW, Z 174, no. 1993/5. criticism, in 1980 VW do Brasil published a detailed brochure – in Portuguese, with
elaborate images – about Rio Cristalino. In view of the increasing criticism in the
308 German media, too, in January 1983 VW AG also arranged for a German version of
This was also reported in “Der Spiegel” the brochure to be printed, and produced a film which it loaned free of charge to
no. 46/1986, pp. 209-212. schools and other educational establishments.307

309 VW do Brasil decided to sell the Rio Cristalino fazenda in 1986, and found a buyer
Sauer/Prange, “Weitere Maßnahmen zur in 1987. However, the negative reporting by the German and Brazilian press on
Sanierung der VW do Brasil” [Further meas- the social conditions of the itinerant workers and the ecological consequences of
ures to turn-around VW do Brasil], January deforestation were only secondary considerations in the decision.308 VW do Brasil
21, 1986, in: UVW, Z 1133, no. 42/1. had been making losses since 1980, so the original purpose of the fazenda as a
tax-saving model was no longer relevant. As long as VW do Brasil was not making
310 profits, it could not invest any untaxed income in the fazenda.
Memo by chairman of the management
board Carl Hahn on a meeting with the A study by the VW do Brasil management board in January 1986 came to the
management board of VW do Brasil conclusion that “satisfactory earnings from cattle and lumber trading are not to be
on March 17, 1982, in: Minutes of the expected because of the top-heavy administration”, and adjudged that the break-
management board meeting on March 29, even point was a long way off. The fazenda needed a short-term capital injection
1982, in: UVW, Z 1133, no. 42/1. of US$ 4.5 million, which VW do Brasil could not afford because of the difficult
earnings situation in the auto business and urgently required investment in
plant modernisation.309 VW do Brasil thus abandoned it comparatively optimistic
forecast made in 1982 that capital investment of just US$ 2.8 million would be
necessary until break-even.310 Contrary to Sauer’s claim in his autobiography “O
homem Volkswagen” [The Volkswagen man], VW do Brasil did not abandon the
project because of supposed threats of a boycott, but because of ongoing losses.

115
11. Franz Stangl: a concentration camp
commandant as an employee of
VW do Brasil

← Production, 1962

117
F R A N Z S TA N G L : A C O N C E N T R AT I O N C A M P C O M M A N D A N T A S A N E M P L O Y E E O F V W D O B R A S I L

The report by the Brazilian National Truth Commission investigating crimes 311
during the military dictatorship seized upon the confirmed fact that VW do Brasil Commissaõ Nacional da Verdade, Relatòrio,
had employed Franz Paul Stangl (1908-1971), the former commandant of the Vol. II, Brasilia 2014, p. 67. The trade union
Nazi death camp at Treblinka, until his arrest by the Brazilian police in 1967. The complainants against VW do Brasil made
claim in the report that Stangl was an official of the Works Security department the same claim based on a different source.
responsible for installing and maintaining security and surveillance systems311
has – after thorough investigation – proved to be false. 312
Concerning Stangl’s career see Gitta Sereny,
How was it possible for a Nazi war criminal who had been a wanted man since “Into That Darkness: From Mercy Killing
1961 to enter Brazil under his true name and find work at VW do Brasil? Born in to Mass Murder” (1974). British journalist
Upper Austria, Stangl began his career as a weaver in the textile industry, passing Gitta Sereny conducted lengthy inter-
his master tradesman’s exam at the unusually young age of 18.312 Owing to the views with Stangl in April and June 1971
high levels of dust pollution in the weaving shed, and his fear of contracting lung following his sentencing to life in prison.
disease, in 1931 he joined the police force in Linz. Stangl earned merit during She added to the impressions and informa-
the suppression of the Socialist uprising in February 1934 and, following the tion gained by also interviewing his wife
murder of Austria’s Chancellor Dollfuß by Austrian Nazis, he uncovered one of the ­Theresa, who had stayed in Brazil.
organisation’s weapons caches. In Autumn 1934 he was rewarded for his loyalty
to the authoritarian Austrian corporative state by being promoted to the Criminal
Investigation Department, and in 1935 he was reassigned to the political section
of the CID in Wels, Upper Austria.

In view of his proven loyalty to the corporative state, his police career would
under normal circumstances have been ended following the ‘Anschluss’ which
saw Austria united with Germany. However, Stangl succeeded in concealing his
tracks, posing as a supposedly illegal NSDAP (Nazi party) member. Here, and in
many other situations in later life, the opportunist Stangl showed his ability to
adapt quickly to new challenges, and take his career down new routes. With the
incorporation of the political section of the CID into the Gestapo (the secret state
police) in 1939, Stangl gained the status of a Gestapo officer, and after the merger
of the Gestapo with the SS security service he was appointed as a member of the SS
to the Reich Main Security Office (Reichssicherheitshauptamt; RSHA).

Stangl’s transition to a Nazi ‘Schreibtischtäter’ [criminal bureaucrat] began in

November 1940 when the RSHA transferred him to the “Gemeinnützige Stiftung
für Anstaltspflege”, supposedly a “charitable foundation for institutional care”,
but in reality a cover organisation for the mass murder of the sick and disabled
who were incapable of working (the so-called operation T4). Through to March
1942, Stangl was responsible as office manager for administering the selection and
murder process at the Hartheim sanatorium in Upper Austria, and for a time also
at the Bernburg sanatorium in Saxony-Anhalt. Stangl’s duties included issuing

118
 F R A N Z S TA N G L : A C O N C E N T R AT I O N C A M P C O M M A N D A N T A S A N E M P L O Y E E O F V W D O B R A S I L

313 the death certificates, by which the truth of mass killing by carbon monoxide
Concerning Stangl’s post as commandant emissions from engines in gas chambers was concealed from the families of the
of the Sobibor and Treblinka death camps murdered patients.
see Sara Berger, “Experten der Vernichtung:
Das T4-Reinhard-Netzwerk in den Lagern After the mass killing of the sick was abandoned, based on their experience of
Belzec, Sobibor und Treblinka” [Experts in organised mass murder by poison gas Stangl and a number of his subordinates
destruction: The T4 Reinhard network at were transferred by the SS to eastern Poland, where – as part of “Operation
the Belzec, Sobibor and Treblinka camps], Reinhard” – they took part in the murder of more than one million Polish Jews
Hamburg 2013 and Yitshak Arad, “Belzec, from the ghettos of eastern Poland and Warsaw at the Belzec, Sobibor and
Sobibor, Treblinka” The Operation Reinhard Treblinka death camps.313 Stangl’s superiors in the SS found him to be a highly
death camps”, Bloomington 1999. 34,000 efficient organiser. He directed the expansion of the Sobibor camp, organising the
Dutch and 16,000 German, Austrian murder of 100,000 people in just two months. During his time as commandant
and Czech Jews were also murdered in of the Treblinka death camp from September 1942 until the camp uprising on
Sobibor. Almost 19,000 Jews from the Reich August 17, 1943, Stangl was responsible for the deaths of more than 700,000
territory and the Protectorate of Bohemia Jewish deportees. According to the statements of the accused SS officers at the
and Moravia were deported to Treblinka 1964/65 Treblinka trial in Düsseldorf, Stangl acted more like a coordinator,
on 11 trains (Alfred Gottwaldt/Diana allowing his subordinates extensive freedom in their murderous work.
Schulle, “Die ‘Judendeportationen’ aus Nevertheless, Stangl bore decisive responsibility for the reorganisation of the
dem Deutschen Reich 1941-1945” [The de- death camp, transforming it from a chaotic slaughterhouse into an efficient killing
portations of Jews from the German Reich factory, murdering more than 10,000 Jews a day in its gas chambers. SS leader
1941-1945], Wiesbaden 2005). and commander of “Operation Reinhard”, Odilo Globocnik, described Stangl as
his best camp commandant.314 One of the few survivors of Sobibor reported that
314 Stangl did not always act like a remote bureaucrat who did not mistreat and kill his
Arad, “Operation Reinhard”, p. 168. victims himself. When one of the deportation trains arrived, Stangl would shoot
prisoners with a pistol, hitting and possibly killing some of them.315
315
Sereny, “Into That Darkness: From Mercy As most of the deportees were driven directly from the trains into the Gas
Killing to Mass Murder”, pp. 141f. chambers, only the small number of Jewish labourers (“Arbeitsjuden”) had a
slight chance of surviving. Although Stangl frequently wore a distinctive white
316 jacket instead of the black SS uniform, he remained virtually invisible to the
Judgement of the Düsseldorf Regional prisoners.316 Stangl showed himself only occasionally at the prisoner roll-calls and
Court against Franz Stangl, December 22, the inspections of the work squads, and after the war had no need to worry that
1970 (Düsseldorf Regional Court file refer- a former prisoner might recognise him. Shortly after the end of the war, Stangl
ence 8 Ks 1/69). was captured by the US Army, and as a member of the SS was imprisoned at the
Glasenbach internment camp in Austria until Spring 1947. The US occupying
powers handed him over to the Austrian judicial system, which had begun
investigating the euthanasia murders at the Hartheim sanatorium and was also
investigating Stangl.

119
F R A N Z S TA N G L : A C O N C E N T R AT I O N C A M P C O M M A N D A N T A S A N E M P L O Y E E O F V W D O B R A S I L

Threatened with trial, on April 30, 1948 Stangl escaped from a remand centre 317
in Linz and fled to Rome, where the pro-Nazi Bishop Alois Hudal (1885-1963) Letter from Schultz-Wenk to Dr. H. Krüger
provided him with a Red Cross pass and money for his onward journey. Hudal (VW AG Legal Affairs department), March
procured a visa for him to enter Syria, and even arranged a job for him at a 31, 1967, in: UVW, Z 1053, no. 105/1; ques-
weaving mill in Damascus. A year after escaping, Stangl brought his wife and three tioning of Franz Stangl by the state prose-
daughters to join him. cutor’s office on June 27, 1967, in: Archive
of the state of North Rhine-Westphalia,
With his Red Cross pass and the Austrian passports of his wife and daughters, the main state archive in Duisburg, inventory
Stangl family emigrated to Brazil in 1951, and settled in São Bernardo do Campo. Ger. Rep. 388 no. 0245.
Stangl reached Latin America by the same route (the so-called “Rattenlinie”, or rat
line) as other high-ranking functionaries of the Nazi regime and internationally
wanted war criminals such as Adolf Eichmann and Josef Mengele had done.
Because the Austrian courts had only been looking for him since 1961, he was able
to enter Brazil under his true name and settle there at no risk.

In Brazil, Stangl profited from his ability to adapt inconspicuously to new

surroundings. Stangl did not seek out the company of other former Nazis, who
gathered to celebrate Hitler’s birthday for example. He quickly learnt Portuguese,
and soon found work as a weaver with a textile company thanks to his experience
and an additional course of technical training. Franz Stangl benefited from the
rising demand in Brazilian industry for skilled staff with technical qualifications.
Through his wife, he came into contact with a neighbour of German descent who
was head of plant maintenance at VW do Brasil. Franz Stangl was employed by
the company as a mechanic in October 1959, under his true names and with his
Austrian papers. Until his arrest on February 28, 1967, he rose to become a group
leader in the plant’s preventive maintenance section.317 His middle and youngest
daughters found work at VW do Brasil as secretaries.

Franz Stangl lived in Brazil under his true identity. He had even registered himself
and his family with the Austrian consulate in 1954. When his two older daughters
married, Franz Stangl obtained copies of his children’s birth certificates and his
own marriage certificate through the consulate. Stangl’s record in Austria was
still unblemished at the time. It was only in 1961 that the Austrian police again
placed him on a wanted-list for the murders in Hartheim. Although Austria’s
embassies and consulates routinely received copies of the list, the consular
officials in São Paulo failed to cross-check the names on it against the register of
Austrians living there. This failing is all the more astounding as Latin America had
become infamous as a refuge for Nazi war criminals since the kidnapping of Adolf
Eichmann from Argentina in May 1960, if not before.

120
 F R A N Z S TA N G L : A C O N C E N T R AT I O N C A M P C O M M A N D A N T A S A N E M P L O Y E E O F V W D O B R A S I L

318 Stangl had been known to the Austrian public since 1964. When the guards from
Concerning the trial at the Düsseldorf the Treblinka death camp went on trial in Düsseldorf, an Austrian newspaper
Regional Court of the Treblinka guards refer reported that the camp commandant Stangl was on the run, and was wanted by
to the judgement dated September 3, 1965 the German and Austrian courts.318 The inaction of the Austrian consulates in
(Düsseldorf Regional Court file reference 8I the hunt for war criminals was not a unique national characteristic however: The
Ks 2/64). West German intelligence service, the BND, had been informed of Eichmann’s
whereabouts by 1958 at the latest, and had kept the information from the Federal
319 Prosecutor General and the prosecutors’ offices of the German federal states.
Stangl was arrested by the Political Police
because it was responsible for the registra- Stangl was arrested by the Political Police in front of his house on February 28,
tion and surveillance of foreigners. 1967, thanks to the untiring efforts of ‘Nazi-hunter’ Simon Wiesenthal.319 A
former Gestapo officer had told Wiesenthal in February 1964 that Stangl was in
320 Brazil. As the Austrian courts were being sluggish in dealing with the Stangl case,
Daniel Stahl, “Nazi-Jagd: Südamerikas in the Summer of 1966 Wiesenthal turned to Brazilian senator Aarao Steinbruch
Diktaturen und die Ahndung von NS- in order to initiate cooperation between the Brazilian state prosecutor’s office and
Verbrechen” [Nazi-hunt: South America’s the Austrian Justice Ministry.320 With the aid of an acquaintance in the Brazilian
dictatorships and the punishment of Nazi police, Steinbruch discovered in early January 1967 that Stangl worked at VW do
crimes], Göttingen 2013, pp. 196-208; Brasil.
Felipe Cittolin Abal, “Nazistas no Brasil e
extradiçao: Os pedidos de extradiçao de The Personnel department of VW do Brasil was completely surprised by Stangl’s
Franz Stangl e Gustav Wagner em uma arrest. Chairman Schultz-Wenk reacted to the news not with shock, but with relief,
análise historico-juridica”, Curitiba 2014, because the Brazilian press – as opposed to “Spiegel” magazine – made no mention
pp. 80ff. Refer also to the documentation of Stangl’s employers, so VW do Brasil’s reputation remained undamaged.321
by the Simon Wiesenthal Archive in Vienna: The Personnel department cannot be accused of intentionally adopting a not-
http://www.simon-wiesenthal-archiv. wanting-to-know attitude. Although the German press had reported in detail on
at/02_dokuzentrum/02_faelle/e02_stangl. the Treblinka trial of his former subordinates in 1964 and 1965, Stangl’s name was
html (accessed July 16, 2017). not mentioned.

321 Schultz-Wenk justified his inaction to the VW AG Legal Affairs department with
“Der Spiegel” 28/1967, p. 30. an excuse that was not untypical at the time: “Since the company’s founding,
the positions of VW do Brasil’s personnel director and his deputy have been held
by two German-Jewish immigrants. It was therefore those two gentlemen who
recruited Mr. Stangl.” According to this skewed logic on the part of the former Nazi
party member Schultz-Wenk, two representatives of the persecuted and murdered
Jewish people were responsible for Stangl’s recruitment.

Schultz-Wenk’s accusation is countered by the fact that Stangl was initially

employed only as a mechanic, and senior Personnel department managers would
certainly not have had anything to do with the recruitment of an ordinary worker.
VW do Brasil liked to employ German-speaking immigrants and Brazil-born

121
F R A N Z S TA N G L : A C O N C E N T R AT I O N C A M P C O M M A N D A N T A S A N E M P L O Y E E O F V W D O B R A S I L

German-Brazilians because of their reputation as loyal and reliable employees, 322

and because they spoke German, so Stangl’s recruitment was a matter of routine. This was indicated by a letter from the
The personnel files of earlier employees do not contain any details which indicate Israeli VW importer Champion Motors Ltd.
close questioning of their prior careers. Everything points to the fact that Stangl dated March 15, 1967, which sent the VW
concealed his prior career as a police officer so as not to arouse a hint of suspicion. AG Export department a translation of a
Schultz-Wenk’s justification was in response to a query – no written record of lengthy report in the Israeli daily news­
which survives – from the Legal Affairs department in Wolfsburg, who were paper “Maariv” on Stangl’s arrest,
concerned about negative reporting in Israel.322 According to a report in the Israeli in: UVW, Z 1053, no. 105/1.
daily newspaper “Maariv” on March 15, 1967, VW do Brasil had provided Stangl
with a top attorney, and had a positive attitude to the recruitment of former Nazis. 323
In fact, VW do Brasil no longer concerned itself with Stangl after his arrest, so that Concerning Stangl’s trial see “Der Spiegel”
suspicion was groundless. 20/1970, pp. 81-84 and 53/1970, p. 42.

The courts of three countries were attempting to extradite Stangl in order to put 324
him on trial: Poland, Austria and West Germany. As Stangl was threatened with Brigitte Hamann, “Winifred Wagner oder
the death penalty in Poland, and the state prosecutor’s office at the Düsseldorf Hitlers Bayreuth” [Winifred Wagner: A Life
Regional Court was well advanced in its investigations thanks to the 1964/65 at the Heart of Hitler’s Bayreuth], Munich
Treblinka trial, in June 1967 the Brazilian government approved his extradition 2002, p. 593.
to Germany. On December 22, 1970, after a seven-month trial, the Düsseldorf
Regional Court sentenced him to life imprisonment.323 He died of a heart attack
on June 28, 1971 in Düsseldorf prison.

A range of evidence points to a persistent culture of forgetting, covering-up and

not wanting to know at Volkswagen AG. As one example, in 1952 VW AG employed
the long-standing deputy Gauleiter (Nazi party leader) of the Bayerische Ostmark
region in Bavaria, Ludwig Ruckdeschel, as a host looking after prominent guests.324
Ruckdeschel (1907-1986) had ordered two citizens of Regensburg to be summarily
executed in April 1945 because they had pleaded for a peaceful handover of the
city to the US Army. He was prosecuted for the offence, serving a term in prison
between 1947 and 1952. In view of Ruckdeschel’s criminal record, and his barely
concealable past career as a Nazi functionary, his was a blatant case of looking the
other way.

122
F R A N Z S TA N G L : A C O N C E N T R AT I O N C A M P C O M M A N D A N T A S A N E M P L O Y E E O F V W D O B R A S I L

123
12. Results

← Volkswagen model range in Brazil,

1979

125
R E S U LT S

VW decided to build a plant in Brazil in 1956, under pressure from Brazil’s

protectionism. In view of the major potential for growth on the Brazilian market,
the decision proved to be a happy one for the entire Group. Within just a few years,
VW do Brasil became the market leader in the Brazilian auto sector.

The management of VW do Brasil was not involved in the removal of the last
democratically legitimate government and the coming to power of the military
dictatorship in 1964, and did not provide the coup organisers with any financial
support. It adjudged the military coup of 1964 and the establishment of an
increasingly repressive military dictatorship to be an unambiguously positive
development, as it expected more stable – and above all pro-business – policies to
result. Although the management board of VW AG was aware of the political and
social repression in the military dictatorship thanks to the credible reporting on
it by German media, it accepted and trivialised the situation as being inevitable,
based on a colonialist perspective. No clear evidence has been found to support
the conjecture that VW do Brasil provided material assistance to the operation of
a torture centre by the military (DOI-CODI). It is possible that an indirect financial
contribution was made through the company’s membership dues paid to the
industrial confederation FIESP, and by the provision of vehicles free of charge.

Thanks to the high growth rates of the Brazilian economy, the positive
expectations as to the development of VW do Brasil were not disappointed, indeed
were even surpassed, until the first oil price crisis hit in 1974. The high domestic
demand for cars and the strong competitive position enjoyed by VW do Brasil
enabled it to generate extraordinarily high profits, which meant it was able to self-
finance all its capital investments and make substantial transfers of earnings back
to its parent company. Government wage controls and restrictions on trade unions
kept pay levels lower than they would have been in a pluralistic democracy with
freedom of pay bargaining and the right to strike. VW do Brasil, and ultimately
also VW AG, profited from the suppression of fundamental workers’ rights.

The management of VW do Brasil exhibited unreserved loyalty towards the

military government, and shared its economic and domestic policy goals.
Correspondence with the management board in Wolfsburg through to 1979
reveals unreserved approval of the military government, which did not stop short
of personal assurances of loyalty. In 1969 the Works Security department began
a collaboration with the regime’s Political Police (DEOPS) which only ended in
1979. The prime driver of that collaboration was the head of Works Security,
Ademar Rudge, who felt a particularly close allegiance to the regime’s security
organs as a result of his earlier position as a Brazilian Army staff officer. He acted

126
 R E S U LT S

in his role on his own initiative, but with the tacit knowledge of the management
board. As there was no legal duty to report expressions of opposition views,
in carrying out surveillance of opposition activities among the workforce and
denouncing activists the leadership of the Works Security department acted on
its own authority and out of a sense of self-evident loyalty to the military regime.
Although the role played by Works Security in identifying and arresting an illegal
Communist grouping cannot be precisely determined, if it had not collaborated
the arrests might well have been at least delayed, and possibly prevented.

Works Security monitored opposition activities by the company’s employees, and

by its conduct aided the arrest of at least seven members of staff. This happened
at a time when the use of torture by the Political Police was already common
knowledge among the Brazilian and German public. According to the statement
by the imprisoned worker Lucio Bellentani, Works Security allowed him to be not
only arrested but also mistreated by the Political Police on the plant premises.
Voluntary collaboration with the regular policing organs of the dictatorship
(Polícia Militar) persisted until the first large-scale strike of 1979. However, the
gradual transition back to the rule of law at that time meant that it did not have
any negative consequences for the workers concerned. Nevertheless, VW do
Brasil was still dismissing employees because of their trade union activities until
1980. The exchange of ‘blacklists’ of politically troublesome workers with other
companies is proven by documentary evidence.

The suspicion expressed by the National Truth Commission that VW do Brasil

had employed the former concentration camp commandant Franz Stangl despite
knowing about his crimes proved to be false. VW do Brasil recruited him to carry
out maintenance work without knowing anything of his former life, and only
found out about his war crimes following his arrest.

Up until 1978, the management board of VW AG received little information

concerning the development of relations between VW do Brasil and its employees,
or about trends in pay rates. In view of the high wages paid in the auto industry
by Brazilian standards, the lack of interest in the material situation of the
employees and their working conditions was explicable. The Group’s executive
bodies – the management board and the supervisory board – only began to take
an interest in those issues in 1979, when a 15-day strike brought to light the labour
conflicts and deficiencies in industrial relations at VW do Brasil. It was only the
de facto restoration of the right to strike which demonstrated that authoritarian
paternalism could no longer motivate and restrain the VW do Brasil workforce.
Chairman of the management board Toni Schmücker initially responded in a

127
R E S U LT S

placatory manner to the demand of the Brazilian metalworkers’ union that the
Group management board should intervene, though he did take the reports of
social and legal grievances seriously.

From 1979 onwards, the management board of VW AG, aided by the diplomatic
skills of personnel director Karl-Heinz Briam and of General Works Council
chairman Siegfried Ehlers, initiated a change in the corporate culture at VW do
Brasil. The management’s social learning process initially met resistance and
objections on the part of VW do Brasil chairman Wolfgang Sauer. Although the first
Works Council of VW do Brasil elected in October 1980 was not comparable to a
Works Council constituted in accordance with the German Works Constitution Act
either in terms of the election procedure or the body’s competencies, in the early
1980s VW do Brasil became a ground-breaker in terms of industrial democracy in
Brazil. The cultural transformation began in the midst of a severe economic crisis
which resulted in a 40% decline in unit sales and nullified any financial flexibility
to provide appropriate levels of pay to the company’s employees. The gradually
emerging willingness of the management board to negotiate with the union in
1981, at the high-point of the crisis, enabled a reduction in the originally planned
number of mass redundancies and the instigation of a participatory corporate
culture. From 1982 onwards, the Works Council of VW do Brasil was elected by a
procedure which no longer placed union members at a disadvantage.

Based on current knowledge, the transformation of savannah forest into pasture

land on the VW fazenda in the Brazilian state of Pará was a serious ecological
error which ultimately only brought VW financial losses. VW do Brasil indirectly
shared a substantial portion of the responsibility for the exploitation of itinerant
workers engaged on clearing operations. The fazenda’s management engaged
exploitative employment agents with the knowledge and approval of the VW do
Brasil management board. In doing so, it violated fundamental social standards,
instead of employing the workers itself on acceptable terms.

128
IMPRINT

Author
Christopher Kopper

Editors
for Corporate History Department of Volkswagen Aktiengesellschaft
Dieter Landenberger

Design
designagenten.com

Printed by
Quensen Druck + Verlag GmbH

© Volkswagen Aktiengesellschaft
Wolfsburg 2017
© Volkswagen Aktiengesellschaft
Corporate History Department
Letter box 1974
38436 Wolfsburg
Germany
E-Mail [email protected]
Internet www.volkswagenag.com