The Volkswagen brand has taken a beating over the past year, primarily due to the company’s admission that it had installed software in vehicles in a concerted effort to rig emissions tests. The emergence of the scandal resulted in a plummeting stock price and a recall of as many as 11 million vehicles, costing the company an estimated $20.35 billion dollars.
With the company facing potential criminal charges for that scandal, the last thing they needed was another controversy. However, disputes with multiple suppliers led to seat maker Car Trim and cast iron part maker ES Automobilguss stopping deliveries on August 18. That forced Volkswagen to stop production on its Passat vehicle at some of its plants.
The complaint by the companies is that Volkswagen abruptly cancelled a signed contract after changes had been made to the respective plants in order to accommodate the deal. The contract with Car Trim was worth over $500 million and set to begin in 2017.
The costs incurred from the emissions scandal are undoubtedly tied to the cost-cutting measures undertaken by Volkswagen. The problem is that this situation has meant that the company would lose revenues of approximately $45 million for every week that production remains inactive.
Given those looming losses, Volkswagen went to court the day after the supply stoppage was announced and got a temporary injunction, though an appeal will be heard on August 31. That injunction stated that it was the suppliers that were breaching their contracts, with fines of up to $283,000 possible.
All of these ugly headlines were immediately noticed by both Volkswagen dealers and their customers, with trepidation on both sides being the overriding emotion. Promised deadlines that aren’t met for customers to receive their vehicles could have far-reaching ramifications down the road for the beleaguered company.