Daimler and VW against Prevent: The wrong strategy of the German car industry

04/11/2018

Daimler and VW v Prevent The wrong strategy of the German car industry

A guest commentary by Stefan Randak

Volkswagen and Daimler in a clinch with Prevent: The increasingly open conflict between suppliers and car manufacturers is also affecting manufacturers

The dispute between VW and Daimler and the supplier Prevent shows in all its harshness how much car companies have become dependent on their suppliers. However, future challenges such as e-mobility and autonomous driving can only master both together – time to rethink.

Prevent, with its turnover of about two billion euros, is not exactly the largest among automotive suppliers, but is now well known for its position in enforcing contract law where appropriate, even if with dubious prospects of success. The claim for damages against Daimler Show stock market chart in the amount of 40 million euros, which is being negotiated in front of the Stuttgart district court, give experts only a small chance. And just a few days ago announced Volkswagen Show stock market chart the supplier decisive supply contracts. A signal that is considered by many to be a reminder of Prevent’s 2016 delivery stop.

Are such actions effective from both sides, let alone economically? Hardly likely.

The Prevent Group is threatening the demise of its auto parts companies, ES Automotive Casting, Car Trim and Prevent Foamtech. Short-time work and layoffs for around 700 employees have already been announced due to the VW termination. Even the most recent subsidiary of Prevent, the company Halberg Guss with around 3000 employees, may well be prepared for delivery contract terminations on the part of Volkswagen and suffer a similar fate. In short, job losses are imminent.

Profit addiction, cost pressure, disregard of facts

But the increasingly open conflict between suppliers and car makers also hits manufacturers. Daimler has already cost the dispute with Prevent several million, Volkswagen has to allow for the abrupt end to the collaboration probably about 200 million euros – of which 159 million euros are only going to make other suppliers for the contract acquisition fit. In addition, Prevent is expected to claim millions in damages. In addition, two decades ago, the production shutdown of 160 days, 140,000 non-built vehicles and forced leave for 18,000 employees is echoing.

Profit addiction, cost pressure and disregard of facts are the true roots of these excesses on both sides. While carmakers attempted to reduce their product costs through an one-supplier strategy, Prevent believed that he had reached a unique bargaining position in order to exert pressure in the future. But those who want to keep an eye on the automotive industry of tomorrow must act differently. This applies equally to manufacturers and suppliers alike.

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