When will the automaker stop looking like the bad guy?
People love a good underdog story because usually the top dog is an asshole to the little guy. Seeing said top dog put in check is always satisfying. As Automotive News reports, such a story involving Volkswagen just played out. Yes, the same automaker that has already tarnished its name (and the environment) in the Dieselgate scandal. Volkswagen's latest move indicating its questionable character involved it cancelling a $563 million dollar deal with a supplier named Prevent Group. So why was this cancelled contract such a big deal?
Because it left the smaller supplier with a bill of about $66 million to cover expenses it accumulated while retooling its factory to meet Volkswagen’s now-defunct needs. Prevent Group asked Volkswagen to pay for the costs, but given that the auto giant is currently trying to save cash to pay its Dieselgate bill, it refused. In response Prevent Group stopped supplying seat and transmission components to Volkswagen, effectively shutting two of its production lines down and creating a larger and more expensive nightmare for the automaker. The supply embargo made it so Volkswagen had to stop producing the Passat and Golf, the latter of which is Europe’s best-selling car. Volkswagen was projected to lose $45 million per week due to the shutdown.
Instead it settled with Prevent Group by paying it $15 million in reparations. In addition, Volkswagen agreed to keep the supplier as a partner for at least another six years. This type of back and forth between automaker and supplier is rare, especially for a company as large as Volkswagen. Usually VW gets its way since suppliers depend on larger manufacturers. In part because the German automaker is hurting for cash and in part because Prevent Group knows that VW doesn’t want to bring further shame to its name, the smaller supplier won this round even if it didn’t get fully compensated. Given that the manufacturing relationship features a just-in-time delivery system, VW, like GM, had no stockpile to wait out the shortage.