A VW sign is seen outside a Volkswagen dealership in London, Britain November 5, 2015.  REUTERS/Suzanne Plunkett/File photo

A VW sign is seen outside a Volkswagen dealership in London, Britain November 5, 2015. REUTERS/Suzanne Plunkett/File photo (Copyright Reuters 2016)

VW suppliers keen to avoid disputes despite price squeeze

Features Reuters

Volkswagen suppliers seem keen to avoid more disputes with the company even as they face growing pressure from Europe's largest automaker to accept price cuts.

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Two German suppliers halted parts deliveries to Volkswagen (VW) in August to protest cancellation of a contract by VW, disrupting production and threatening the carmaker's recovery from its emissions scandal.

VW, grappling with billions in costs from the so-called "Dieselgate" scandal and a strategic shift to electric cars, has said it will review procurement strategy to avoid any repetition of the crippling dispute.

At a suppliers' fair in Wolfsburg on Tuesday, parts makers sounded eager to play ball.

Christoph Kaune, key account manager at U.S.-based Maxion Wheels which supplies steel and aluminum wheels to VW, said cost-cut pressures at the German group are "extremely high" and it is tough to get it to agree on compensation for fluctuating steel prices.

"It's very difficult to find a fair compromise but VW is one of our biggest customers," Kaune told Reuters at the international suppliers' fair. "That's what really matters."

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Marek Poskart of Canada's KSR International Co., a maker of fixed pedal modules and automotive sensors, agreed.

VW is seeking to extract greater price cuts from suppliers than in the past, he told Reuters, but the negotiations are fair and KSR has started to improve development processes to better meet VW's price targets.

"If your cost structure is plausible you will have no difficulties with VW," Poskart, a sales director, said. "It's a give-and-take."

VW is not only squeezing down prices but has also reduced orders, a sign of its push to cut costs by tackling complexity in R&D, said Kai Rohrbach, a manager at GOM GmbH which makes 3D scanners and software in Braunschweig near VW's Wolfsburg headquarters.

"In the past they sometimes bought four to five systems at once but now it's only about two at a time," he said.

When he opened the biannual event on Monday, VW Chief Executive Matthias Mueller warned that carmakers and suppliers would only together be able to cope with "the epochal change" driven by electric cars and autonomous driving.

"We want to be successful with you together," the CEO said. "That's the only way how it can work."

(Reporting by Andreas Cremer; Editing by Tom Brown)