Volkswagen's board members have accepted the resignation of the company's personnel chief amid a bribery scandal rocking Europe's biggest automaker, a government spokesman told CNN on Wednesday.

There was no decision on who would replace Peter Hartz, Olaf Glaeseker, spokesman for Lower Saxony governor Christian Wulff, told the broadcaster.

CNN said the board's so-called presidium making the decision included board president Ferdinand Piech, ex-VW president, IG Metall union chief Juergen Peters, VW labour council chief Bernd Osterloh and Wulff, whose state is the main investor.

CNN said that Hartz, a close ally of German chancellor Gerhard Schroeder, has denied any wrongdoing, but he offered to quit last week amid growing media reports he failed to stop the use of company-funded perks like vacation trips to persuade union officials to accept hard-nosed reforms.

Widely reported, though unconfirmed, the perks also included the hiring of prostitutes, CNN added.

The report noted that Hartz associates are also under investigation for allegedly receiving kickbacks for contracts with the automaker and, as a result, VW is re-examining plans for Czech subsidiary Skoda to build a plant in India.

CNN said that, struggling to turn a profit, VW is on a cost-cutting campaign and blew the whistle itself on the scandal, alerting government investigators.

The scandal reportedly has tainted Hartz's reputation and possibly in turn that of Schroeder, who made Hartz the architect of his labour and welfare reforms aimed at forcing the hard-core unemployed back to work.

CNN noted that the so-called Hartz reforms were highly unpopular among more leftist members of Schroeder's Social Democrats, some of whom have broken away to form an alternative party that is now rating 10% in the polls and could play a spoiler role in expected September elections.

Hartz offers to resign

All eyes on VW bribery allegations

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