VW Is Laid Low by Defiant Bosnian Supplier Battling Cutbacks

  • Volkswagen, Prevent Group reach accord on parts deliveries
  • Bosnian manufacturer is Balkan country’s biggest exporter

In a year of almost non-stop crises following revelations of cheating on emissions tests, the force that finally brought Volkswagen AG’s factories to a halt wasn’t regulators or a court ruling, but a defiant parts supplier from the former Yugoslav republic of Bosnia-Herzegovina.

Europe’s biggest carmaker stopped assembly lines for its best-selling Golf hatchback and larger Passat sedan as a result of the dispute with Prevent Group, a Sarajevo-based company controlled by one of Bosnia’s wealthiest families. The supplier, which provides Volkswagen with seat and transmission parts, reached an agreement on Tuesday to resume deliveries, and VW’s six affected factories will resume manufacturing on a step-by-step basis, the carmaker said following overnight talks.

Two Prevent subsidiaries quit delivering components after the German carmaker canceled a new contract and refused to reimburse money spent to fill the order. While VW is known for using its purchasing power to muscle through cuts, Prevent is the first supplier to fight back by halting deliveries, puzzling industry observers as the two fight it out in court.

“It must have been something huge,” Nihad Imamovic, who began working with Prevent founder Nijaz Hastor during the company’s early days in postwar Bosnia-Herzegovina, said of the company’s moves. “Something terribly wrong must have been done to him.”

New Generation

Volkswagen gained as much as 2.9 percent and was trading up 2.3 percent at 122.80 euros as of 12:38 p.m. in Frankfurt. That pared the stock’s drop this year to 8.2 percent, valuing the German automaker at 63.8 billion euros ($72.3 billion). Volkswagen said in a statement that the parties agreed not to disclose terms of the settlement. The companies have declined to comment on details of the dispute, which emerged last week.

Prevent, Bosnia’s biggest exporter, has more than 13,000 employees at 36 locations around the world, making goods ranging from car seats to men’s clothing to interiors for luxury yachts. The company’s rebellion comes after Hastor, the family patriarch whose business relationship with VW dates back some 40 years, handed over day-to-day control of the company to his sons. The new generation is facing turbulent times in the industry, with revenue gains at their lowest level in seven years and small suppliers facing wafer-thin profit margins as they struggle to keep up with new technologies, Roland Berger Strategy Consultants GmbH and Lazard Ltd. said in a joint study published last month.

Hastor started his career in a far simpler auto-components industry. In the late 1970s, Hastor was in charge of non-metal parts for Tvornica Automobila Sarajevo, which built VW models under the TAS brand, according to Imamovic, who oversaw metal parts at the company. In 1988, Hastor moved to Wolfsburg, VW’s headquarters, to represent metals conglomerate UNIS in its dealings with the German auto industry. He later was put in charge of VW suppliers in Slovenia, including the original Prevent, a company that took its name from its original line of business, manufacturing protective gloves.

Early 1990s

In the early 1990s, Hastor began buying up Slovenian parts manufacturers, gradually turning himself into a VW supplier. He expanded Prevent production in Bosnia, then moved the company’s headquarters to the capital, Sarajevo. He got in touch with his old colleague Imamovic just as the Balkan wars were winding down, hiring him as head of his ASA Group, founded alongside Prevent, which grew to encompass everything from insurance and leasing to freight forwarding and organic farms.

When Imamovic retired in early 2011, he sold his stake in ASA to Hastor. He says his old colleague had the papers drawn up for 10 percent more than they had agreed the holding was worth.

“We remained very good friends,” Imamovic said by phone from the coast of Croatia. “He never looks down on anybody.”

Hastor also had excellent relations with VW, said Borut Meh, who headed Prevent Global in Slovenia for two years just under a decade ago.

“He was a very positive personality, and he wouldn’t be blackmailed,” Meh said. “He was successful because he focused on the core business.”

Aggressive Style

With Hastor’s sons in control and now seeking to diversify the company, Prevent has adopted a more aggressive business style, according to two people familiar with their plans, who asked not to be named discussing internal matters. Born in Sarajevo, Kenan Hastor and Damir Hastor grew up partly in Germany and studied abroad, according to Bosnian news reports. Just before his wedding last year, a Bosnian news site crowned Damir Hastor “Bosnia’s most eligible bachelor.”

Meanwhile, Prevent has continued to make acquisitions, including the two subsidiaries now fighting with VW, the Car Trim seat-component division and ES Automobilguss transmission-parts unit. The order canceled by VW involved a 500 million-euro deal with Car Trim that was scheduled to start next year, a person familiar with the matter said last week.

‘Harakiri’ Move

The company first clashed with VW in Brazil, said two people familiar with the matter. The dispute there was over quality issues and late supplies, and as in Germany, Prevent’s subsidiaries threatened to halt deliveries, one of the people said.

The question is why Prevent would fight back on a larger scale in Germany, given VW’s power and probable ability to lock the Bosnian company out of future contracts, said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany.

“It looks like harakiri,” or ritual suicide, Bratzel said. “It will be difficult for them to compete in the next few years, at least with the same management.”

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