VW Says Production Will Resume After Deal With Suppliers

VW and the two Prevent DEV group suppliers, CarTrim and ES Automobilguss, held talks for more than 20 hours to resolve the dispute that threatened to cost the carmaker thousands of vehicles in lost output.

Mnet 173398 Germany Volkswagen Hock

HAMBURG, Germany — Volkswagen said the two suppliers with which it has been at loggerheads over a contract dispute had agreed to start delivering parts again and that plants hit by production stoppages would gradually resume output.

VW and the two Prevent DEV group suppliers, CarTrim and ES Automobilguss, held talks for more than 20 hours to resolve the dispute that threatened to cost the carmaker thousands of vehicles in lost output.

VW said it had had settled its differences with the suppliers, but gave no further details. The suppliers confirmed an agreement had been reached.

The dispute affected about 28,000 workers at six of VW’s 10 German factories on Aug. 22 when the automaker halted production of the Golf and Passat models, as well as assembly of engines, gearboxes and emissions systems, due to the Wolfsburg-based suppliers’ refusal to deliver parts.

VW today said the parties had agreed not to disclose details of the agreement. The suppliers will restart deliveries as soon as possible, and the factories affected will return to normal production on a step-by-step basis, VW said.

CarTrim, which makes seat covers, and ES Automobilguss, which produces cast iron parts needed to make gearboxes, sought compensation from VW after saying they faced lost revenue running into tens of millions of euros after VW cancelled a contract.

Mnet 173398 Germany Volkswagen Hock

Wider Impact

Pressure had been growing on both sides to resolve the dispute, with Germany’s economy ministry warning of the broader impact on jobs.

About 500 companies that supply parts for the Golf were being forced to build up inventories because the carmaker was not buying, according to the German Association of Supply Chain Management, Procurement and Logistics.

“The consequences for the entire supply chain are already considerable today,” Christoph Feldmann, managing director of the association, said in a statement.

VW is accustomed to strong-arming suppliers but it got a rare pushback, complicating efforts to tighten costs to recover from its emissions-cheating scandal. According to Prevent, VW was seeking to pass on the costs of the crisis by squeezing suppliers, and the parts maker was forced to take a stand to secure its survival.

Prevent is led by the family of Bosnian businessman Nijaz Hastor, who has sought to bolster his activities in the German auto industry in recent years.

“I think they (VW) have an attitude versus their suppliers which is a little bit too tough,” Michael Fuchs, deputy leader of German Chancellor Angela Merkel’s Christian Democrat-led parliamentary bloc, said in a Bloomberg Television interview.

There could be a silver lining for VW in limiting Golf output. The automaker had already cancelled Golf production shifts on October 4-7 and Dec. 19-22 due to falling demand. VW said the stoppages were part of regular production adjustments.

“Given the slowdown of VW sales (excluding China), the brand certainly needs to slightly trim production levels,” said London-based Evercore ISI analyst Arndt Ellinghorst.

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