VW says six German plants hit by supplier dispute

August 22, 2016 3:05 AM EDT

A VW sign is seen outside a Volkswagen dealership in London, Britain November 5, 2015. REUTERS/Suzanne Plunkett/File photo - RTSMMUB

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FRANKFURT/BERLIN (Reuters) - Volkswagen said it faced production delays at more than half its German plants because of a row with two suppliers that analysts estimate may cost the carmaker tens of millions of euros.

About 28,000 workers at six of Volkswagen's (VW) 10 German factories were affected after the carmarker halted production on Monday of the top-selling Golf and Passat models as well as assembly of engines, gearboxes and emissions systems due to a shortage of parts.

VW's supplier conflict poses a threat to the company's profitability as it seeks to recover following its diesel emissions scandal.

Analysts at UBS estimate that a one-week production halt at its Wolfsburg headquarters would result in about 100 million euros ($113 million) in lost gross profits and could have knock-on effects on other suppliers.

"Production at several Volkswagen plants has been interrupted as a result of a halt in component deliveries by external suppliers," VW said in a statement.

Efforts by Europe's largest carmaker to force CarTrim, which makes seats, and ES Automobilguss, which produces cast iron parts needed to make gearboxes, to resume deliveries have not succeed, VW said.

The local suppliers, part of Wolfsburg-based Prevent DEV, are seeking compensation after saying they faced lost revenues running into tens of millions of euros after VW cancelled a contract. VW is seeking to resolve the dispute in top-level talks with the suppliers on Monday afternoon.

Germany's Economy Ministry called for a swift end to the dispute, noting thousands of workers were affected.


The carmaker has pulled out all legal stops to force the suppliers to resume deliveries, including threatening fines and even seizure of the missing parts.

Car Trim has so far ignored an injunction that VW has obtained and the regional court in Braunschweig is due to consider a possible injunction against ES Automobilguss on Aug. 31.

Lower Saxony Economy Minister Olaf Lies, a member of VW's supervisory board, has said the dispute is hitting VW "at the worst possible time". Whether management is to blame for over- reliance on single suppliers need to be clarified, he added.

Industry analysts were critical of VW.

"A global player has based its entire production chain on a mid-sized company," said Ferdinand Dudenhoeffer, head of the Center of Automotive Research at the University of Duisburg-Essen. "That is not only amateurish but also extremely naive."

VW shares paid little heed to the dispute and were trading 0.5 percent lower at 119.35 euros as of 1226 GMT, while Germany's blue-chip index <.GDAXI> was down 0.7 percent. ($1 = 0.8858 euros)

(Reporting by Jan Schwartz and Andreas Cremer, writing by Edward Taylor, editing by Georgina Prodhan)

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