VW supplier dispute worries German government
Stefan Baumgarten
24-Aug-2016
LONDON (ICIS)–Germany must avoid a repeat of disputes
such as the one between car major Volkswagen (VW) and two of
its parts suppliers, the head of the government of VW’s home
state of Lower Saxony said in a webcast media briefing on
Wednesday.
Six VW plants in Germany, affecting 28,000 workers, saw
production disrupted this month after two suppliers ceased
delivering parts needed for gearboxes and seats amid a
contract dispute with VW.
Because of just-in-time logistics, ripple effects hit VW’s
supply chains, causing concerns in the polybutylene
terephthalate (PBT) and other upstream markets.
The dispute was settled on Tuesday and the
suppliers resumed deliveries, but it remains unclear when the
car plants will be back at normal production rates.
Lower Saxony’s minister president Stephan Weil said that
a Germany could not afford such disputes to become a
precedent, but rather needed to avoid repeating them in
the future, given the impacts on the country’s economy.
With the division of labour and complex supply chains in the
automotive sector, the disruptions at VW could have quickly
affected many other firms and jobs, with far-reaching
consequences for the economy, he said.
Weil also shed light on the nature of the dispute on which
neither VW nor the suppliers commented. Lower Saxony is a
stakeholder of VW and Weil, in his role as a member of
VW’s supervisory board, also speaks for the
company.
He said that the dispute was triggered after VW and one of
the suppliers could not agree on the amount of compensation
VW should pay after it cancelled a contract.
However, that contract dispute was a separate matter, and it
was not justifiable for the car parts firm to stop deliveries
under existing contracts to exert pressure on VW, he
said.
He added that in the car industry, car makers and their
supplier were “playing hardball” in their negotiations,
“nobody can deny that”.
Nevertheless, the car parts firms should have left it to the
courts to decide the dispute, he insisted.
He rejected suggestions that he was biased in favour of
VW.
“At the end of the day, this was about 28,000 people who
feared for their jobs”, he said.
The car parts firm had been seeking to press their case at
the expense of the workers, “who really did not deserve
this” kind of treatment, he added.
The suppliers, CarTrim and ES Automobilguss (ESA), both
belong to Prevent Group, an international Bosnia
Herzegovina-based car parts firm.
VW’s relations with its suppliers came under strain last year
amid alleged attempts by the car major to extract big cost savings from
suppliers following its diesel car emissions scandal.
Additional reporting by Katherine Sweeny
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