It must be Volkswagen's unlucky year.
After Dieselgate, it seemed like Volkswagen pissed off a lot of people with its greedy ways. As most of us learn early on in life, if you try to screw people over for your own benefit it usually comes with a side serving of disastrous results. Now it seems that Volkswagen is learning its lesson once again, this time from its own parts supplier. According to Bloomberg, Prevent Group, a company that supplies VW with transmission components and seat parts, has halted its deliveries to the automaker’s German factories.
The reason is that Prevent Group wants to protest the fact that Volkswagen backed out of a supply contract worth 500 million Euros ($566 million US dollars) that would have begun next year. In preparation for the deal, Prevent Group invested heavily into upgrading its manufacturing facilities. With VW backing out it is left with the cost of investment and no source of return. Without the car parts delivery, Volkswagen was forced to halt production of the Passat and will do the same to the Golf assembly line next week. As it might sound, this is a hugely expensive problem for the automaker, which is currently trying to pinch every penny possible to recover from Dieselgate.
Making matters worse is the fact that it may have to pay more money out to European owners. As it stands, the production line stoppage could cost Volkswagen as much as $45 million per week. This may be an extreme measure on Prevent Group’s part, but it is the uglier side of corporate legal battles. The fight between the two companies is set to begin in court on August 31st, or far away enough for VW to lose $76.5 million bucks. German courts could force the supplier to keep producing parts while the dispute is being sorted. But Prevent Group is trying its best to prevent (no pun intended) that from happening in order to make a scene and show how it isn’t right for a larger corporation to use its size against the little guys.