VW faces production delays amid dispute

Volkswagen has halted production at several plants in Germany, hitting the output of Golf and Passat models amid a dispute with two external suppliers.

The suppliers, one making seats and the other parts used in gearboxes, have stopped delivering to VW in a contract row.

Car and parts production has already been halted at four plants and will be stopped at two others later this week.

The carmaker said the interruptions in production would affect 27,700 staff.

"Although Braunschweig District Court has issued injunctions obliging the suppliers to resume deliveries, the suppliers have not as yet met their obligations. Volkswagen continues its efforts to reach agreement with the suppliers," said the company in a statement.

The two suppliers are CarTrim, which makes seats, and ES Automobilguss, which makes cast iron parts used in gearboxes.

They are demanding compensation from VW because they say they their incomes were hit when VW cancelled a contract.

VW says it is continuing its efforts to reach agreement with the suppliers.

Production stoppage

The company said the production stoppage would not affect cars that have already been ordered. Any effect on future production will depend on how long the dispute lasts.

Some production has already been halted at Wolfsburg, which makes Golfs, and at Zwickau where Golfs and Passats are made. Production is due to begin again later this week.

Production has also stopped at Braunschweig, which makes chassis parts and plastic parts, but should start again next Monday.

Later this week, production will cease at Salzgitter, which is involved in engine production, and Kassel where transmission and exhaust system production takes place.

In what the company said was an unrelated issue, production was halted at Emden, which makes Passats, last week and will resume on Wednesday.

In some cases employees have been sent home, in others they are engaged in short-time working on other jobs within the plants.

'Acute supply risk'

The German Economy Ministry on Monday called on VW and the suppliers end the dispute.

"We assume and also expect the companies to solve the sticking issues as soon as possible," Economy Ministry spokesman Andreas Audretsch told journalists during a regular news conference.

He added: "It is about thousands of jobs, which could be affected by shorter work hours, and the responsibility to tackle these problems constructively is very high."

VW in the UK issued a statement in which it said the company was "working intensively on minimising the acute supply risk, the priority being to maintain production in some areas and to ensure that deliveries can be made to customers.

"Volkswagen currently expects to be able to adhere to all confirmed delivery dates," it added.