VW announced on Wednesday that it would set up a fund to provide humanitarian aid to people who were forced by the Nazis to work in its factories producing munitions and other supplies for the German war effort.

VW spokesman Bernd Graef said around 7,000 people were pressed into unpaid labour for the company during World War II.

VW was one of around 12,000 German firms to use slave labour during the Third Reich, he added.

Wrangles over compensation

BBC correspondents say VW has been struggling with the issue of legal responsibility towards slave labour for many years.

Only last month, the company rejected claims for compensation from Hungarian victims.

The car giant said it recognised that a violation of their human rights had taken place, but insisted it was up to the German state to pay compensation.

However, the German Government said last year that compensation demands by former slave labourers were no longer valid, but other reparation claims could be made.

VW has now decided to help the surviving slave labourers on a voluntary basis.

'An appropriate humanitarian gesture'

Its initiative was welcomed by the Jewish-based human rights group the Simon Wiesenthal Centre in Los Angeles.

The centre's associate dean, Rabbi Abraham Cooper, expressed the hope it would "spur similar actions by a variety of German and Austrian firms."

He said: "The leadership of Volkswagen has made an appropriate humanitarian gesture which will bring some financial relief to the individuals in their later years."

In a reference to the on-going controversy between Jewish groups and Swiss banks over unreturned Holocaust-era assets, he added that VW's action was "important because it goes against the modus operandi these days of having a phalanx of lawyers building firewalls and stalling."

The Conference on Jewish Material Claims Against Germany, which has been seeking compensation for Jewish wartime slave labourers since its foundation in 1952, also praised VW's plan.

But in a statement it added: "Unfortunately VW's decision to recognise historic and moral obligations toward former slave workers took more than 50 years."

Many former slave workers had already died without compensation or recognition of their suffering, the group said.