Chrysler sues Daimler for withholding engines, parts

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Chrysler sues Daimler for withholding engines, parts



Chrysler Group LLC is asking a bankruptcy judge to force Daimler AG to ship Chrysler diesel engines and other key parts it has refused to deliver, threatening the launch of several Chrysler vehicles.

The Auburn Hills automaker, in a lawsuit filed last week, also asked U.S. Bankruptcy Judge Arthur Gonzalez to decide whether Chrysler must pay Daimler a higher price for the engines if it buys fewer than Daimler expected to make. Finally, Chrysler wants the court to prohibit Daimler from suspending shipments of the engines, steering columns and torque converters in the future.

This is the second lawsuit this month involving Chrysler and its former parent. Earlier, unsecured creditors of old Chrysler charged Daimler with fraudulently diverting assets worth at least $9 billion from Chrysler LLC just before selling 80.1% of the company to Cerberus Capital Management in August 2007.

The creditors charged that Daimler separated Chrysler Financial from Chrysler’s core automaking operations. They also accused Daimler of selling Chrysler’s World Headquarters and Tech Center for $325 million, or less than prevailing market prices, two years ago.

In the more recent suit, Chrysler claimed it reached a July 6 agreement with Daimler on the price and other terms for the engines and other components. The suit also states the companies agreed on an amended purchase order on Aug. 12, but Daimler refused to sign it.

“Daimler’s bad faith conduct and contractual breaches threaten to derail (Chrysler) and send devastating ripple effects through the automotive industry,” Chrysler’s complaint alleges.

A Daimler spokesman did not return a reporter’s phone call for comment.

A Chrysler spokesman declined to say which vehicles could be affected. A court document showed the torque converters were for the Mercedes-Benz W5A580 rear-wheel drive transmission, which has been an option previously on the Jeep Grand Cherokee and Chrysler 300.

LINK:Chrysler sues Daimler for withholding engines, parts | Detroit Free Press | Freep.com

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Chrysler sues Daimler, says production is threatened

Posted Wednesday, Aug 26, 2009, 11:35 am in Employee News

Chrysler Group LLC has accused former parent Daimler AG of refusing to honor contracts to supply components and thus threatening production at some Chrysler factories, the Automotive News reported.

The allegations are contained in a lawsuit filed Friday, Aug. 21, in U.S. Bankruptcy Court in New York, the trade paper said. “Daimler’s conduct threatens to shut down Chrysler Group’s manufacture of key product lines,” Chrysler spokesman Gualberto Ranieri told the Automotive News.

The story said Daimler rejected Chrysler’s claims. “We believe these claims are without merit, and we will defend ourselves vigorously,” Daimler spokeswoman Julia Engelhardt told the paper.

The dispute stems from Daimler’s claim that Chrysler owes it 55 million euros, or about $78.7 million at current exchange rates, to compensate for reduced volume for the 2.2-liter diesel engine Daimler has supplied to Chrysler, the story said. The diesel is used for European sales of such models as the PT Cruiser, the publication said.

According to the story, Daimler said it is owed this amount because Chrysler didn’t buy as many of the engines as it had said it would. In its complaint, Chrysler said “the volume shortfall payment issue was resolved in an April 17, 2009, prepetition agreement that settled a number of disputes between Daimler and the old Chrysler.”

The complaint said Daimler is refusing to supply steering columns and torque converters in order to pressure Chrysler to make the volume-shortfall payment, the story said.

“Chrysler Group believes that Daimler’s misconduct is designed to extort a settlement by wrongfully withholding crucial parts that Daimler has contractually committed to supply to Chrysler Group,” Ranieri told the Automotive News. He said that Grand Cherokee production at the Jefferson North assembly plant in Detroit is threatened, as well as production of the Dodge Charger and Challenger and Chrysler 300/300C in Brampton, Ontario, the story said. (Automotive News)