VW reviews supplier strategy after dispute hits production

Tue Aug 30, 2016 10:17am EDT
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By Jan Schwartz and Andreas Cremer

HAMBURG (Reuters) - Volkswagen (VOWG_p.DE: Quote) Chief Executive Matthias Mueller has vowed to review the German car giant's procurement strategy to avoid any repetition of the crippling supplier dispute that hit production at six plants this month.

Still reeling from a diesel emissions scandal, VW will re-examine contracts that leave the group dependent on a single supplier after the dangers were highlighted by its damaging wrangle with Bosnian parts maker Prevent, Mueller said.

"We will of course look into questions such as multi-sourcing, single-sourcing," he told reporters late on Monday. "We will look at our procurement contracts and try to optimize matters with all suppliers."

Carmakers generally seek to avoid over-dependence on any one supplier and seek to duplicate critical relationships even at slightly higher unit costs.

But Car Trim and ES Automobilguss, two suppliers within privately held Prevent group, exposed a vulnerability when they halted seat cover and gearbox parts deliveries, triggering stoppages at VW assembly plants.

Since the 2008 financial crisis, carmakers have outsourced more parts development and manufacturing to save cash and meet technological demands for electric vehicles, smartphone-compatible infotainment and autonomous driving.


A general view shows the Volkswagen production site in Wolfsburg, Germany, April 28, 2016.    REUTERS/Fabrizio Bensch/File Photo