Volkswagen Golf production halted over supplier dispute

Volkswagen will extend a production shutdown to factories making its best-selling Golf as an unprecedented dispute with a supplier halts delivery of the parts and sends both sides to court.

Parts of six vehicle assembly plants will be idle on Monday, halting work on Volkswagen’s Golf line along with the Passat, a spokesman said on Sunday. Work on the Passat stopped on Thursday, and the dispute has slowed output at two plants that make chassis. Workers in Emden producing the Passat will be on shortened work hours until Wednesday, while Golf production will be interrupted for a week, the spokesman said.

Negotiations with the supplier of seat and transmission parts wrapped up late on Friday and will resume this week, the spokesman said.

Prevent Group's Car Trim seat-component division and ES Automobilguss transmission-parts unit suspended deliveries when Volkswagen refused to reimburse the suppliers after dropping a contract. The parts-makers had demanded compensation of €58 million, German newspaper Sueddeutsche Zeitung reported on Sunday.

The production stop at VW's site in Wolfsburg could cost as much as €100 million a week, UBS analysts calculated. The threat to earnings comes as the carmaker seeks to boost sagging profit at its namesake brand by lowering annual spending by €1 billion. The supplier in a statement last week said Volkswagen was shifting its problems to suppliers and "exploiting" its dominant position in the market.

Plant alterations

The order cancelled by VW involved a €500 million deal with Car Trim that was scheduled to start next year, a person familiar with the matter said last week. The parts maker said it wanted the car manufacturer to pay for the plant alterations it had made to provide the services.

Volkswagen's works council head Bernd Osterloh said in an interview with Bild on Friday that the suppliers were being "reckless and asocial" in their disregard for workers by stopping the deliveries.

A German court has ordered the supplier to resume deliveries, and an appeal in one of the cases has been set for August 31st.

VW in the meantime has asked the court to fine the supplier and let the car maker go to the factories and load up the parts on its own, the court in Braunschweig said in a statement last week. The parts maker has until this week to respond, and the court will decide then on VW’s request, according to the release.

– Bloomberg