· Volkswagen reassessed suppliers' attempts to adopt a multi-source procurement strategy

Volkswagen CEO Matthias Mueller will re-evaluate its suppliers and adjust its procurement strategy to avoid incidents similar to the labor disputes of the two subsidiaries of the Prevent Group, which was interrupted last month. Six of the home factories were affected, resulting in a decline in production and production suspension.
Muller said that the two subsidiaries of the Bosmia parts manufacturer, Prevent Group, were interrupted by contract disputes and their factories were affected, which gave the public a lesson. In the future, Volkswagen will reassess the contract and will no longer rely on a certain supplier, and similar incidents will occur. He told reporters on Monday: "Of course we will focus on multi-source procurement, single source procurement, etc. We will carefully review the procurement contract and try to negotiate and optimize all suppliers with related matters."
Automakers generally try to avoid over-reliance on a single supplier and seek to build multi-party partnerships, even if the cost is slightly higher. According to reports, last week Volkswagen agreed to pay the Prevention Group 13 million euros (about 14.7 million US dollars) as compensation to terminate the six-day negotiation deadlock, which led to the suspension of Volkswagen Golf and Passat in Germany.
Since the global economic crisis in 2008, major automakers have outsourced component development and manufacturing, saving cash and meeting the technical needs of electric vehicles, smart phones, compatible in-vehicle infotainment systems and autonomous driving. This makes it more difficult to achieve multi-source procurement. The consequences of the Prevention Group's controversy underscore the risk of relying on a single manufacturer to produce a large number of parts, which is becoming unavoidable in today's increasingly strengthened supply chain industry.
In the context of China's slowing growth rate and rising investment costs to meet stringent emission standards, the relationship between automakers and suppliers has become more tense as both parties have to ensure their own profits. Disputes between the Volkswagen and the Prevent Group, as happened last week, are not common. Many suppliers want to ensure that disputes are resolved in a smooth manner. According to the German Business Daily, the public insiders attributed the escalation of the conflict to the personnel changes in the management of the Prevent Group.
London-based Citibank analyst Michael Tyndall said in a recent note to investors: "It can be said that suppliers are now moving in the better direction of profitability in the industry." He said: "But the cancellation of the contract may become more Frequently, as automakers begin to cut vehicle product lines and shift investment to the company's electrification transformation, I think there will be more similar controversies soon."

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