VW settles dispute that stopped output at half of German plants.

Volkswagen and parts suppliers CarTrim and ES Automobilguss settle contract dispute affecting 28,000 workers.

Volkswagen has settled a damaging dispute with two of its suppliers that hit car production at more than half of its German factories.

After more than 20 hours of negotiations that lasted through the night, the German carmaker said on Tuesday that it had reached an agreement with CarTrim, which makes seats, and ES Automobilguss, which manufactures cast iron parts for gearboxes. The dispute affected almost 28,000 workers at six of VW’s 10 factories in Germany.

The Wolfsburg-based company halted production of the popular Golf and Passat cars at the start of the week, as well as assembly of engines, gearboxes and emissions systems.

In a statement, VW said that the suppliers would start delivering parts again “in the near future” and that the affected factories would gradually resume production.

Reeling from the emissions scandal, which has resulted in a sales slump and billions of euros of costs, VW had indicated that it would be pushing for price cuts from its suppliers. It has set aside €18bn to cover litigation and other costs of the scandal, after admitting last September that 11million diesel-powered cars around the world were fitted with software designed to cheat emissions tests.

Last week VW asked a German court to take action against Prevent, the Bosnia-based parent group of CarTrim and ES Automobilguss, for refusing to follow an order to resume deliveries. The dispute centred on a cancelled contract.

Prevent’s German subsidiaries stopped delivering parts to VW when it refused to reimburse the supplier for changes made at its factories before the start of a new contract that was then cancelled.

Olaf Lies, the economy minister of the state of Lower Saxony, where VW is based, and a member of the company’s supervisory board, has said that the dispute had hit VW at the worst possible time. Whether VW’s management should face questions for being overly reliant on a single supplier required clarification, he said.

Germany’s economy ministry had urged both sides to drop their dispute, expressing concern about the impact on jobs. The German Association of Supply Chain Management, Procurement and Logistics has warned of knock-on effects on 500 other companies that supply parts for the Golf.

A VW spokeswoman said it was difficult to predict when production would be resumed and that decisions would be made on a site-by-site basis.

At Emden, where the company makes the Passat, production was halted last Thursday when the carmaker ran out of seats. On Monday, production ceased at Wolfsburg, which normally makes 2,200 Golfs a day and employs 10,000 people; Zwickau, which produces Golfs and Passats; and Braunschweig, which makes chassis components and plastic parts.

Kassel, which produces transmission and exhaust systems, was due to switch to short-time working on Thursday but is now ramping up production again. It was unclear whether Salzgitter, which is involved in engine production, would suspend production on Wednesday as planned.

Analysts at investment bank UBS have estimated that a one-week production stoppage at Wolfsburg could cut VW’s profits by €100m, while analysts at Commerzbank have put the damage at €70m a week.


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