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August 23, 2016

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VW to halt output at 6 plants, cutting hours of 28,000 workers

EMBATTLED auto giant Volkswagen said yesterday it would halt production at six plants in Germany for several days as a legal dispute with two key suppliers deepened.

Around 27,700 workers would have their work hours slashed by the end of August, in a new headache for the group which is struggling to move past an emissions cheating scandal that is costing billions.

VW was forced to take the drastic measures at the factories that produce some of its most popular models including Passat sedans and Golf compacts after the two suppliers of gearbox parts and seat covers halted deliveries.

“Although the state court in Brunswick issued temporary injunctions requiring the suppliers to resume deliveries, they so far haven’t fulfilled this obligation,” the VW statement read.

Instead, the components’ makers are appealing the court decision.

VW said it would resume talks with the suppliers. While the group “wishes to achieve a result through negotiations,” it may also pursue legal means, a spokesman said.

The parts suppliers say that VW broke off several contracts with no advance warning or compensation, leaving them with no choice but to suspend deliveries to protect their own businesses and workforce.

A spokesman for Prevent, the parent of the two firms, told German business daily Handelsblatt last Friday that VW was imposing “unacceptable conditions” on its suppliers.

Handelsblatt also reported that VW was seeking concessions from all of its suppliers, amounting to several billion euros.

The battle has also angered VW worker representatives, who complained that employees are paying for a battle between the manufacturer and its suppliers which they had no role in starting.

Affected factories include Emden, Zwickau, Kassel, Salzgitter, Brunswick, and a key site at the company’s headquarters of Wolfsburg.

One car industry expert said that Volkswagen left itself vulnerable as it depended on a single supplier for the critical gearbox casings.

“It should never be the case that a global company has a medium-sized company as its sole supplier,” Ferdinand Dudenhoeffer of the University of Duisburg-Essen said.

VW, which also owns brands from luxury Audi to lower-end Skoda, is still in the throes of its biggest-ever crisis after it admitted in September 2015 to a huge emissions cheating scandal affecting 11 million diesel engines.

The revelation slashed VW’s share price by 40 percent — a drop in market value of 25 billion euros (US$28 billion) — in two days.

CEO Martin Winterkorn quit over the scandal, and prosecutors in the US said in July that his successor, Matthias Mueller, may also have known of cars’ failure to meet emissions standards as early as 2006.


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