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VW, suppliers struggle to resolve dispute in marathon talks

Tuesday, August 23, 2016 - 11:34
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Volkswagen and two of its auto parts suppliers were pushing to resolve a contract dispute early on Tuesday, spokespeople said, but had no progress to report despite marathon talks as the conflict threatens to cost the carmaker thousands of vehicles in lost output this week.

[BERLIN] Volkswagen and two of its auto parts suppliers were pushing to resolve a contract dispute early on Tuesday, spokespeople said, but had no progress to report despite marathon talks as the conflict threatens to cost the carmaker thousands of vehicles in lost output this week.

More than 13 hours of top-level negotiations between VW and the two suppliers, part of Wolfsburg-based Prevent DEV group, failed to yield a breakthrough agreement, spokespeople for VW and the suppliers said. But the two sides are continuing to seek a solution, they said, without elaborating.

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

VW's supplier conflict poses a threat to the company's profitability as it seeks to recover following its diesel emissions test cheating scandal.

Analysts at UBS estimate that a one-week production halt at VW's Wolfsburg headquarters would result in about 100 million euros (S$152.6 million) in lost gross profit, and could have knock-on effects on other suppliers.

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

Europe's largest automaker has been trying to force the two companies to resume deliveries, suggesting they could face fines or even seizure of missing parts.

Lower Saxony Economy Minister Olaf Lies, a member of VW's supervisory board, has said the dispute is hitting VW "at the worst possible time". Whether VW management should face questions for over-reliance on single suppliers needs to be clarified, he added.

Some industry analysts were also critical of VW. "A global player has based its entire production chain on a mid-sized company," said Ferdinand Dudenhoeffer, head of the Center of Automotive Research at the University of Duisburg-Essen.

"That is not only amateurish but also extremely naive."

REUTERS