Volkswagen Settles Dispute With Suppliers

Volkswagen (LSE: 0P6N.L - news) has settled a major dispute with suppliers that had disrupted car production at more than half its German plants and threatened to derail its recovery following the diesel emissions scandal.

The German car maker said it had resolved its differences with CarTrim, which makes seats, and ES Automobilguss, which makes cast iron parts for gearboxes, after more than 20 hours of talks that ran through the night.

The suppliers were seeking compensation for lost revenue they said ran into tens of millions of euros, after VW cancelled a contract.

Details of the settlement between the two sides were not revealed.

The dispute affected about 28,000 workers at six of the car maker's ten German factories on Monday when it halted production of the top-selling Golf and Passat (LSE: 0NF6.L - news) models, as well as assembly of engines, gearboxes and emissions systems.

Volkswagen said on Tuesday that the suppliers had agreed to re-start deliveries and that the affected plants would gradually resume production.

Analysts at UBS (LSE: 0QNR.L - news) had estimated that a one-week production halt at the carmaker's Wolfsburg headquarters would cost it €100m (£86m) in profit and have a knock-on effect on other suppliers.

It comes as Volkswagen is seeking to recover after the admission last year that it had installed illegal software that deactivated pollution controls on 11 million cars worldwide.

Last month it set aside an additional €2.2bn (£1.9bn) to cover the cost of the scandal, taking the total provision to more than €18bn (£15bn).

It has had to pay for car recalls and buy-backs as well as a multi-billion dollar US legal settlement.