VW Announces Tougher Pace Against Suppliers

2023 Author: Eric Donovan | [email protected]. Last modified: 2023-08-25 09:36

VW had to stop production of the Golg at its main plant in Wolfsburg because of a dispute with a supplier. Now the car manufacturer is announcing a tougher course against the supplier.

In the dispute with two suppliers, Volkswagen wants to exhaust all legal options in order to put an end to the delivery stop at its external partners. In the end, the bailiff, with the police in tow, could get the urgently needed parts from the supplier if necessary. The carmaker was forced to "prepare the enforcement of the delivery, with the means available to us by law. These include fines, detention, and seizure, which are requested through the court," said a VW spokesman on Friday and confirmed corresponding information from the "Süddeutsche Zeitung".

The announcement by the automaker is not surprising. For the benefit of its shareholders alone, VW has to pull out all possible levers to defuse the mess. At the car manufacturer, the assembly lines are already partially idle, short-time work is already pending for 7,500 employees, and it could be more than 20,000. The exact background of the dispute and the trigger are still unclear. However, the VW spokesman also emphasized that the car manufacturer does not want to worsen the situation unilaterally. "At the same time, we will continue to try to reach an amicable agreement with the supplier."

Escalation is regretted

VW is in a legal clinch with two suppliers. On the one hand there is the transmission parts specialist ES Automobilguss, on the other hand Car Trim, an expert in seat covers. Both are attributable to the Prevent Group's own information. At least its German part, Prevent DEV GmbH from Wolfsburg, claims that it is "not legally" associated with the companies. "We also have no access to the affected companies. Nevertheless, we very much regret the escalation of the current conflict," writes the company.

The background to the dispute is largely in the dark. The cancellation of a future project with Car Trim should be at least one root of the quarrels. According to information from the German Press Agency, VW was in principle prepared to provide financial compensation. But the demands made by the supplier are said to have been unrealistic. That cannot be verified. Both parties do not want to comment. It is not clear why the situation escalated in such a way.

The VW group is known in the industry for its bargaining power - only Toyota and General Motors now build a similar number of vehicles. The procurement director Francisco Javier Garcia Sanz is one of the most experienced buyers in the industry. At the end of June, he wrote to the suppliers that the carmaker also had to "become significantly more efficient in terms of procurement costs". He wants to mobilize the reserves. "We want to achieve this in a cooperative manner, but also with the necessary consistency in order to remain competitive," he announced the direction of the march.

Streamlining the variety of parts

The renewed pressure to save, fueled by the billions in costs of the diesel scandal, increases the pressure on the efficiency program that has been running for a long time in the low-yield VW core brand for the Golf and Passat. In the meantime, Volkswagen is reaping the first fruits from its fight against the excessive variety of parts in car construction: With the cleared jungle of variants, for example with steering wheels, colors or buttons, the core brand VW passenger cars has already uncovered a savings volume of over 700 million euros per year, writes VW works council boss Bernd Osterloh in the house sheet "Mitbestimmen" published on Friday. VW is now also dealing with the issue of the diversity of parts on another front: the delivery stops are paralyzing the car manufacturer. The course for short-time work could also fall in Wolfsburg on Friday. Golf production there will be suspended until August 29th. The local employment agency does not want to say anything about data protection, but according to dpa information there is a meeting in the authority. The plants in Kassel, Braunschweig and Zwickau are also threatened with bottlenecks.

According to dpa information, VW has largely relied on just one supplier for a special transmission part for the successful Golf model. The principle is known in the industry as "single sourcing". It's obviously risky. The waiver of variants described by Osterloh only has to do with this to a limited extent. Some variants come from the same manufacturer. VW builds others on its own. Nevertheless: The delivery stop at VW moves the need to save, the procurement policy and the dependency in the focus

So far, the legal dispute hangs at the regional court in Braunschweig. There will be an oral hearing there on August 31st about a controversial injunction with which VW is taking action against the supplier.

The main plant of Europe's largest car manufacturer is in Wolfsburg. It builds almost 4,000 cars a day, including the Golf, the Tiguan and Touran, but the production lines do not have to stop. For Wolfsburg, the five working days Monday through Friday next week could run on short-time work. (dpa)