VW to Temporarily Stop Golf Production due to Supplier Conflict

Volkswagen is in the middle of a brutal legal battle with one of its suppliers, a conflict that has put the automaker’s factories in Germany at a standstill. VW stopped production of the Passat sedan in Emden on Thursday and will halt Golf production in Wolfsburg next week.

Prevent Group, which makes seat and transmission parts, is furious that VW backed out of a contract. The parts maker had already made adjustments to its factory to prepare for the services that VW cancelled. Meanwhile, the automaker reportedly refused to discuss reimbursing the supplier for the costs. A source familiar with the supplier told Bloomberg that the 500-million-euro deal over seat components was expected to begin next year.

The supplier halted deliveries to VW as a result of the conflict. VW has taken an interim injunction against the supplier, and a court hearing has been set for August 31.

Golf production will idle for five days next week in Wolfsburg because VW no longer has the cast iron parts needed to make transmissions for the car. VW is cutting shifts at its gearbox facility in Kassel and at its plant in Zwickau that makes the Golf and Passat. A factory in Emden, which builds Passats, is already offline and will remain so until August 24.

The delay could reduce VW’s earnings by as much as 40 million euros, or $45 million, a week, according to Christian Ludwig, an analyst at Bankhaus Lampe. The timing of the conflict couldn’t be worse, as the automaker is trying to save as much money as it can to cover costs related to its diesel scandal.

Source: Bloomberg, Automotive News Europe (Subscription required)

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