Back in 2016, Volkswagen was having a tough go of it. The world had recently discovered that the German automaker had been faking results on government diesel emissions tests, and the resulting scandal tarnished the company’s reputation, not to mention costing it millions of dollars in refunds, rework and fines.
But it seems there were other ways still of kicking VW when it was down. In August of ’16, two suppliers – both part of Bosnia’s Prevent Group – effectively stalled VW production after a dispute meant the carmaker had to idle six plants. The story was that VW unexpectedly cancelled a contract with Prevent, and the supplier retaliated by suspending shipments of seats and gearbox components for Golfs and Passats that were already in production.
The spat was resolved when VW quickly agreed to compensate its supplier of 25 years for the cancelled order, and to extend their partnership for another six years. But that six-year plan didn’t appear to work out, as Automotive News is reporting that VW has abruptly cancelled all contracts with Prevent Group.
Prevent says VW is repeating the same pattern of behavior that led to the 2016 dispute and that the supplier has been forced to lay off some workers and cut the hours of others. But what if VW doesn’t care what happens to Prevent Group?
While Automotive News says its common for automakers to examine their relationships with suppliers in order to close gaps and minimize potential disruptions, other sources suggest that this is more than just standard operating procedure.
German public news agency Deutsche Welle indicates that the abrupt severing of the relationship is fueled by revenge for the way Prevent forced VW into the 2016 shutdown. Deutsche Welle quotes a report in German newspaper Bild where an unidentified VW manager says that the company doesn’t want to be blackmailed anymore. Further, a VW rep told the news agency that the company “depends, at all times, on a reliable and trustworthy relationship with its suppliers.”
Despite announcing a new contract with BMW recently, it’s likely that the termination of the Volkswagen relationship will cause significant trouble for Prevent Group, and Bosnia in general. According to Reuters, Prevent is Bosnia’s largest private sector company. With 70 percent of its orders coming from Volkswagen prior to the fallout, there’s a lot of ground to make up in order to stave off bankruptcy, which Bild suggests is a possible result.