VW Said to Pay Compensation to Supplier to End Six-Day Standoff

(Bloomberg) -- Volkswagen AG agreed to pay compensation to a supplier to end a six-day standoff that halted Golf and Passat production, people familiar with the matter said.

The amount is well below Prevent Group’s initial demands seeking 58 million euros ($66 million) to cover factory alterations made in preparation for a 500 million-euro order that VW canceled, said the people, who asked not to be identified because the two sides agreed not to talk publicly about the deal reached on Tuesday. Sueddeutsche Zeitung reported that the agreed-upon figure is 13 million euros.

As part of the settlement, VW will continue purchasing parts from Prevent units for at least six years in the future, the people said. The two sides agreed not to seek further damages from one another over the current feud, while German automaker reserved the right to pursue claims in the future if parts from the Bosnian supplier don’t meet the automaker’s quality standards, they said.

Europe’s largest carmaker halted work at six factories across Germany, affecting nearly 28,000 workers, after two subsidiaries of Prevent took the unprecedented step of withholding deliveries of seat and transmission components amid the contract dispute. The supplier’s move represented a rare pushback against Volkswagen, which is accustomed to strong-arming parts makers. The dispute complicates efforts to cut costs at VW’s namesake brand and recover from an emissions-cheating scandal that has led to record fines.

Prevent Group will restart deliveries as soon as possible, and Volkswagen’s affected factories will gradually return to normal production, the companies said in a joint statement on Tuesday. They didn’t release any details and spokesmen for the two declined to comment on the agreement when contacted by Bloomberg.