VW to hold talks on production-crippling dispute

Embattled automaker Volkswagen will hold talks Monday with two component suppliers, in a bid to end a stand-off over car parts deliveries that has severely disrupted production at the German giant.

VW to hold talks on production-crippling dispute
According to media reports, VW has been seeking concessions from all of its suppliers, amounting to several billion euros. Photo: DPA

ES Automobilguss, which supplies cast gearbox components, and Cartrim, which makes seat covers, suspended their deliveries in August over a legal dispute with Volkswagen.

VW secured temporary injunctions on August 12 ordering the two suppliers to resume deliveries.

But the part suppliers have appealed the decision, forcing VW to slash work hours at key factories, and even suspend manufacture of the popular Golf model at its main plant in Wolfsburg, northern Germany.

In a bid to resolve the stand-off, the disputing parties held talks into the early hours of Saturday, a VW spokesman told AFP, adding that they decided “jointly to postpone talks to Monday”.

The group “wishes to achieve a result through negotiations”, although it may also be obliged to pursue legal means, added the spokesman.

The parts suppliers accuse VW of having cut several contracts with no advance warning or compensation, leaving them no choice but to suspend deliveries to protect their own workers.

According to media reports, VW has been seeking concessions from all of its suppliers, amounting to several billion euros.

Volkswagen, 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 the massive emissions cheating scandal affected 11 million diesel engines.

The revelation slashed the carmaker's share price by 40 percent — a drop in market value of €25 billion — in two days.

VW has had to set aside billions of dollars to settle damage claims from car owners and to retrofit the affected cars.

It secured preliminary approval for a $14.7-billion settlement from a California judge in July.

But several German states are examining legal action to claw back losses to pension schemes and other holders of VW shares.

The company may also be forced to pay out for environmental damages in cases brought by several US states.





Five things to know about Germany’s ‘dieselgate’ scandal

The emissions cheating scandal, which on Tuesday saw three Volkswagen chiefs charged and its rival Daimler heavily fined, has had major repercussions for the car industry since it broke four years ago.

Five things to know about Germany's 'dieselgate' scandal

Exposed in 2015

On September 18th, 2015, the US Environmental Protection Agency (EPA) reported that VW had installed illegal “defeat devices” in hundreds of thousands of engines in the United States since 2009.

The software — used in the Volkswagen, Porsche, Audi, Seat and Skoda brands — helped the cars meet exhaust pollution standards when monitored in tests even though their emissions actually exceeded the limits.

It meant that some cars spewed out up to 40 times more harmful nitrogen oxide — linked to respiratory and cardiovascular diseases — than legally allowed.

The company later admitted that 11 million diesel vehicles worldwide, including 8.5 million in Europe and 600,000 in the United States, had been fitted with the software, most of them in the VW brand.

SEE ALSO: 'Dieselgate': German prosecutors charge former Audi boss with fraud

Legal fall-out

VW chief executive Martin Winterkorn, who stepped down five days after the scandal broke, was in April 2019 charged with serious fraud, unfair competition and breach of trust.

Eight former and current executives and an Audi official have been charged in the United States, including Winterkorn.

Audi chief executive Rupert Stadler was charged in July 2019 with fraud, falsifying certifications and illegal advertising in connection with the “defeat devices”.

Former Audi head Rupert Stadler at a press briefing in 2018.

VW's guilty plea to a US criminal case in March 2017 settled its legal entanglements there, bringing to around $22 billion the amount it agreed to pay in fines and compensation to owners and dealers and for environmental clean-up.

The group still faces investigations and lawsuits around the world, in Europe the countries include Britain, France, Germany, Italy and Poland.

Costs for VW

The scandal has so far cost VW around 30 billion in fines, compensation and buybacks, mainly in the United States.

The company announced a net loss of nearly €1.6 billion in 2015, its first in 20 years, after setting aside billions to cover the costs of the dieselgate.

In June 2018 it agreed to pay a 1 billion fine in Germany, admitting its responsibility for the diesel crisis.

Audi agreed in October 2018 to pay an 800 million fine and Porsche was in May 2019 ordered to pay a fine of 535 million.

Other carmakers?

Tests in the wake of the scandal found that diesel engines by other carmakers were also more polluting on the road than during testing.

But none have so far admitted to mass cheating.

However Mercedes-Benz maker Daimler was in June 2018 ordered to recall 774,000 diesel vehicles across Europe because they too were fitted with illegal “defeat devices”.

Fiat Chrysler agreed in January 2019 to a pay $515 million to settle claims it installed the software.

And in February 2019 German prosecutors fined high-end carmaker BMW 8.5 million euros over diesel cars with higher harmful emissions than allowed, though they found no criminal wrong-doing.

Opel is also being investigated.

A worker holds up a Volkswagen badge at the VW plant in Wolfsburg. Image: DPA

Market reaction

A study released in March 2017 said that pollution from 2.6 million rigged VW cars sold in Germany would likely cause 1,200 premature deaths in Europe because of the excess emissions.

In Germany more than 410,000 customers are demanding compensation, as are

More generally, European drivers appear to have largely shrugged off the controversy while VW sales have fallen in the United States.

VW said in July 2019 it expects “slightly higher” unit sales for the year than in 2018.

SEE ALSO: VW sees steady profits in 2018 results