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Last Updated: Monday, 11 July, 2005, 17:03 GMT 18:03 UK
Scandal claims senior VW figure
Bonnet of Volkswagen car
Volkswagen is one of Germany's best-known brands
German carmaker Volkswagen's personnel chief has offered to quit amid claims that union leaders at the firm were bribed with holidays and prostitutes.

Peter Hartz offered his resignation on Friday, if he goes he will become the third leading figure at VW to resign.

Mr Hartz has strongly denied the claims and the firm will decide whether it has accepted his resignation on Wednesday.

A close adviser to German Chancellor Gerhard Schroeder, he gave his name to major government economic reforms.

He has been backed by Chancellor Schroeder.

Klaus Schuster, a former director of VW's Skoda unit, and Klaus Volkert, VW's top worker representative, had already stepped down.

Police are investigating front companies allegedly set up by VW directors to handle flows of money.

Works councils

The BBC's Ray Furlong in Berlin says it is a heavy political blow to Mr Schroeder ahead of a general election expected in September.

He adds that the scandal is also focusing attention on the German system whereby union leaders and company officials make decisions together in so-called works councils.

Critics say it is a cosy historical anachronism and a breeding ground for corruption.

Supporters argue it has contributed to Germany's low strike rate.

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