VW director urges quick end to dispute affecting production

The company is in dispute with some suppliers after it terminated contracts last week. Even the gearbox parts are in shortage in supply which has resulted in the change in working hours at Kassel, another German plant comprising 16,000 workers produce gearboxes, auto parts, and electric engines.

NiedersachsenMetall, an association of around 300 industrial companies in VW’s home state of Lower Saxony, said a number of suppliers had expressed their concern about the dispute.

Analysts at UBS had estimated that a one-week production halt at the carmaker’s Wolfsburg headquarters would cost it €100m (£86m) in profit and have a knock-on effect on other suppliers.

But German news agency DPA said there were two suppliers that had disrupted deliveries – one that makes textiles and leather for vehicle interiors and another that specialises in cast parts for gearboxes.

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 is considering to use “every legal means at its disposal” to force the suppliers into meeting their delivery commitments, according to German media, including police-escorted trucks into the suppliers’ plants to collect the said components. Prevent refused to abide by a court ruling to resume parts deliveries.

Prevent Group will restart deliveries as soon as possible, and Volkswagen’s affected factories will gradually return to normal production, the companies said in a joint statement on Tuesday.

“It should never be the case that a global company has a medium-sized company as its sole supplier”, Ferdinand Dudenhoeffer of the University of Duisburg-Essen said.

VW said in June it would integrate components units with the goal of saving costs and boosting efficiency from a single management and unified strategy. The automaker had already cancelled Golf production shifts on October 4-7 and December 19-22 due to falling demand.

“We are really surprised that the fight is escalating to a level where production is severely impacted”, Sascha Gommel, a Commerzbank analyst, said in a note to clients.

Shares in VW slid 0.3 percent to reach 119.55 euros on Monday afternoon, while Frankfurt’s DAX eased 0.3 percent.