Late talks end VW-supplier standoff

Volkswagen AG negotiated through the night to reach a deal Tuesday with a supplier, ending a six-day standoff that halted production of Golf and Passat cars after the parts-maker refused to provide seat and transmission components.

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. They declined to release details of the agreement.

Europe’s largest automaker halted work at six factories across Germany, affecting nearly 28,000 workers, after two subsidiaries of Prevent, based in Sarajevo, Bosnia-Herzegovina, withheld deliveries of components in a contract dispute.

“I think [Volkswagen has] an attitude versus their suppliers which is a little bit too tough,” Michael Fuchs, deputy leader of German Chancellor Angela Merkel’s Christian Democrat-led parliamentary bloc, said in a Bloomberg Television interview. Volkswagen has to “negotiate properly” with its suppliers.

The Wolfsburg, Germanybased manufacturer has responded to the crisis stemming from the emissions cheating with a far-reaching push to lift sagging sales and profit at its VW brand. According to Prevent, Volkswagen was seeking to pass on the costs of the crisis by squeezing suppliers, and the parts-maker was forced to take a stand to secure its survival. Still, the standoff isn’t likely to be duplicated by Prevent’s peers.

“I don’t see this happening again,” said Sascha Gommel, an analyst with Commerzbank AG, who had estimated that the production stoppage could cut profit

by as much as $79 million a week. “You’re really risking business.”

During the component shortages at assembly lines, Volkswagen had started sending thousands of workers home Thursday. The shutdown expanded to production of the best-selling Golf on Monday, when the company said it was making arrangements for shorttime work, a program that

involves the government compensating employees for some of their lost wages. The plan faced resistance from some German politicians, who balked at bearing costs for the dispute.

“It’s good that we have an agreement now and hence the clarification of a dispute that was economically damaging and distressing for everyone involved,” said Stephan Weil, the prime minister of Volkswagen’s home state of Lower Saxony and a member of the carmaker’s supervisory board. “This example mustn’t

serve as a model.”

Even with the agreement, Volkswagen still could face aftershocks over the standoff. Bafin, the German financialmarket regulator, said it’s looking into whether VW was too slow in informing markets about the dispute. The company didn’t issue a public statement on the matter until Monday.

Prevent is led by the family of Bosnian businessman Nijaz Hastor, who has sought to bolster his activities in the German auto industry in recent years. With

Hastor’s sons in control and now seeking to diversify the company, Prevent has adopted a more aggressive business style, according to two people familiar with the company’s plans, who asked not to be named discussing internal matters.

Meanwhile, Prevent has continued to make acquisitions, including the two subsidiaries that fought with VW, namely the Car Trim seat-component division and ES Automobilguss transmission-parts unit. The order canceled by VW involved a

$565 million deal with Car Trim that was scheduled to start next year, a person familiar with the matter said last week.

Volkswagen, which employs more than 600,000 people worldwide, had key facilities, including its main plant in Wolfsburg, stalled by Prevent as a result of the carmaker’s just-in-time manufacturing system. Under the widely used production strategy, components are delivered straight to the assembly line rather than stored in warehouses, cutting

costs but leaving little buffer in the event of a disruption. Such incidences, however, are rare since suppliers rely on auto manufacturers for their livelihood.

The carmaker’s workers “welcome the agreement and the resumption of production,” Volkswagen’s works council said in a statement. “Our colleagues want to build cars and not sit at home with nothing to do.”