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Here’s Why Volkswagen’s Supplier Problems Just Became a Lot Worse

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Volkswagen Golf 7 car.Photograph by Alexander Koerner — Getty Images

Volkswagen has been forced to reduce work hours and production at six of its German factories after the automaker was unable to negotiate a settlement over a contract dispute with two of its suppliers. Production of VW’s Passat and Golf models will be affected by the temporary plant closures and reduced hours.

The German automaker said in an announcement on Monday that it is continuing to work on reaching an agreement with suppliers CarTrim and ES Automobilguss, which are owned by parent company Prevent DEV GmbH.

CarTrim, which makes seats, and ES Automobilguss, which constructs housings for gearboxes, stopped deliveries to the giant German carmaker last week. The two companies have accused Volkswagen (VLKAY) of canceling contracts without explanation or offering compensation. CarTrim and ES Automobilguss are seeking compensation to offset what they say will be tens of millions of euros in lost revenue.

Germany’s Braunschweig District Court has issued injunctions requiring the suppliers to resume deliveries. VW says the suppliers have not as yet met their obligations. The interruption in deliveries has caused supply problems for VW.

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The factories will closed for short periods of time, beginning with its Emden plant (which produces the Passat sedan), its Braunschweig factory (makes chassis components and plastic parts), and Wolfsburg (handles some segments of the Golf production). Emden will be closed through Thursday. Wolfsburg will be closed through August 27, and Braunschweig through August 29.

For more about Volkswagen’s settlement over the emissions cheating scandal, watch:

Other plants that will be affected include VW’s Zwickau factory (which produces the Golf and Passat), its Kassel plant (makes transmission and exhaust systems), and Salzgitter (produces segments of engines).

In all, approximately 28,000 people work at these six factories.