VW sees car output back to normal by Monday after supplier deal

HAMBURG/BERLIN (Reuters) - Volkswagen <VOWG_p.DE> said on Wednesday production of cars at its German plants should be back to normal by next Monday after it resolved a dispute with parts suppliers over contract terms.

The dispute with suppliers Car Trim and ES Automobilguss, which had stopped deliveries of seat covers and cast iron parts for gearboxes, had threatened to undermine Volkswagen's (VW) recovery from its diesel emissions scandal.

VW and the two suppliers on Tuesday resolved the dispute affecting 28,000 workers at six of VW's 10 German factories, a day after Europe's largest automaker halted production of the top-selling Golf and Passat models as well as assembly of engines, gearboxes and emissions systems.

Component plants in Kassel, Salzgitter and Braunschweig will accelerate production over the coming days to reach normal output levels by the start of next week, VW said.

The suppliers were seeking 58 million euros ($65 million) of compensation for advance payments they made on a development contract that VW cancelled without notice, two sources familiar with the matter told Reuters. VW had refused to pay the sum.

The new deal will see the suppliers, both part of Prevent group, work with VW for at least another six years, and VW will also be able to source up to 20 percent of cast iron parts from another supplier over that time, the sources said.

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(Reporting by Jan Schwartz and Andreas Cremer; Editing by Mark Potter)