Chrysler Shuts 4 Plants After Ending Parts Contract
Chrysler LLC temporarily halted production at four assembly plants in a dispute with an auto- parts supplier that threatens to shut the third-largest U.S. automaker's factory network.
Chrysler closed the plants today after following through Feb. 1 on a threat to revoke contracts with Plastech Engineered Products Inc., said Kevin Frazier, a spokesman for Chrysler. Plastech filed for Chapter 11 bankruptcy protection hours after Chrysler's cancellations.
``It's highly unusual,'' said James Gillette, a supplier analyst with CSM Worldwide Inc. of Northville, Michigan. ``It must have been a pretty serious situation to come to this.''
Chrysler's move may result in the closure of all 13 of its North American assembly plants unless the automaker finds a way to obtain Plastech parts on an interim basis, according to Chrysler documents filed in U.S. bankruptcy court two days ago.
Chrysler sues to get tooling from bankrupt supplier
Without Plastech's tools, Chrysler said its production is at risk. This week alone, the situation stands to cost Chrysler $225 million, said Chrysler attorney Michael Hammer during a court hearing today.
But to give back those tools, Plastech says, would disrupt production for other customers and could throw the company's future into question.
"We will lose the business if they just come in and rip the tools out," said Gregg Galardi, an attorney for Plastech.
Chrysler had teams ready at Plastech plants to take back the tools Friday night, after winning a court order to do so. But the company had to stand down after the bankruptcy filing, which protects Plastech from litigation while it reorganizes.
Chrysler has asked for an exception to that rule.
Plastech's general counsel, Kelvin Scott, pointed out that the company continues to supply parts to its other customers, including General Motors Corp. and Ford Motor Co.
Plastech said Chrysler abruptly cancelled millions of dollars in business one day after Plastech had all but negotiated an agreement with customers, including Chrysler, to help keep Plastech afloat.
Twice in the last two years, Plastech's largest customers had made agreements to accelerate payments of about $86 million, and additional financial help.
In court papers, Plastech said Chrysler had sent letters in mid-January saying the supplier breached the contract between the two companies.
In court papers, Plastech said, on Thursday night a deal was nearly complete.
The following day, Chrysler hand-delivered a one-paragraph letter to Plastech CEO Julie Brown ending its business with the company and asking the company to make the tooling available, and then sought a court order for the machinery.
The local shutdown is costly. The Toledo complex makes about 1,200 Liberty and Nitro vehicles a day and about 580 Wranglers. Inventories of the vehicles are shrinking.
A month ago, there were 72 days worth of Wranglers nationally, 57 days of Liberty, and 64 days of Nitro, according to Automotive News.
Plastech manufactures 70 to 80 parts for the Liberty and Nitro, and another two dozen for the Wrangler, Mr. Henneman said.
Chrysler, in a suit filed yesterday in U.S. Bankruptcy Court in Detroit, said it and other automakers have bailed out Plastech in recent months.
The Auburn Hills, Mich., car firm paid more than $10 million two weeks ago. It decided to cancel its contracts Friday but was unable to remove its equipment at Plastech sites because the Chapter 11 bankruptcy stopped such actions without a court hearing.
Closing a single assembly plant for a week costs about $100 million, said John Henke, auto analyst and president of Planning Perspectives Inc. On Monday, Chrysler shut down the Sterling Heights plant, along with factories in Toledo, Belvidere, Ill, and Newark, Del. Henke said the Plastech dispute is a trial by fire for new Chrysler owners Cerberus Capital Management LP and John Campi, Chrysler's recently-appointed procurement chief. Campi, like Chrysler CEO Bob Nardelli, is a veteran of Home Depot Inc. and General Electric Co. Campi started his career with Southfield-based auto supplier Federal-Mogul Corp.
"This is a nice baptism into the automotive industry for John Campi," Henke said. "Supplier relationships here are very different than buying consumer goods for Home Depot mostly from China."
Henke said he's surprised Chrysler would cancel the Plastech contracts without ensuring the tooling would be returned or having an alternate supplier in place.
"This mistake is costing them tens of millions of dollars a day," he said. "This could be a little payback from Plastech."
February 05, 2008: 10:38 AM EST
DETROIT -(Dow Jones)- An attorney for supplier Plastech Engineered Products Inc. said in court Tuesday that he believes the company has an interim production agreement with Chrysler LLC.
Chrysler has said it wants to remove machine tools used in Plastech plants to make parts for its vehicles.
Plastech said it needed more time for the transition.
During a hearing Monday in U.S. Bankruptcy Court in Detroit, Plastech attorney Gregg Galardi said "I believe we have an interim production agreement with Chrysler."
The agreement comes a day after U.S. Bankruptcy Court Judge Phillip Shefferly told both companies "to work something out." Shefferly declined Monday to order the companies into an interim production agreement.
He did grant Chrysler's request for an expedited hearing on its request that it be allowed to pull 4,000 pieces of Chrysler-owned machinery from Plastech plants. Arguments will take place on Feb. 13.
Agreement reached in dispute that idled Chrysler plants
Associated Press - February 5, 2008 11:54 AM ET
DETROIT (AP) - Chrysler and struggling parts supplier Plastech Engineered Products have reached a deal for Plastech to resume sending parts to the automaker.
Article published Wednesday, February 6, 2008
TEMPORARY SOLUTION
Jeep plant calls back thousands of workers
Deal with Plastech halts parts crunch
It was a temporary agreement reached yesterday between Chrysler LLC and a key supplier, but the shipment of interior vehicle parts meant thousands of laid-off workers at the Toledo Jeep Assembly complex have been called back to work.
Plastech Engineered Products Inc., of Dearborn, Mich., was to begin resupplying Toledo Jeep and other Chrysler plants, so the assembly plants were to be nearly in full production yesterday afternoon.
Toledo Jeep makes Jeep Liberty, Jeep Wrangler, and Dodge Nitro. The complex employs 4,000 Chrysler workers. Most were furloughed Monday.
Details of the agreement between Plastech and the automaker were not disclosed, but the agreement extends through Feb. 15. Chrysler last week canceled its contracts with the supplier and tried unsuccessfully to recover its tooling to move it to other suppliers.
Haig Stoddard, a senior auto industry analyst with Global Insights Automotive Group in suburban Detroit, said the temporary agreement likely won't settle much.
"In the interim, it allows them to keep production going in hopes that they'll come to a more permanent solution until they go to court on Feb. 13," he said.
"Chrysler was in a position that they had to do something. They had to get production going again or they would have been losing an awful lot of money," Mr. Stoddard said.
Chrysler CEO says it will replace Plastech as part supplier
Wednesday February 06, 2008, 5:25 PM
CHICAGO (AP) -- Chrysler LLC plans to end its relationship with parts supplier Plastech Engineered Products Inc., shifting the business to other companies because of a price dispute, Chrysler CEO Robert Nardelli said Wednesday.
Speaking to reporters at the Chicago Auto Show, Nardelli said a price increase sparked Chrysler's efforts last week to remove tooling it owns from Plastech factories. Plastech says the move forced it to file for Chapter 11 bankruptcy protection to stop Chrysler from taking the tooling.
Nardelli also indicated that Chrysler will move its business if suppliers raise prices too high.
Chrysler asks bankruptcy court for Plastech relief
DETROIT (Reuters) - Chrysler LLC asked a federal judge on Wednesday to let it take equipment and its business from bankrupt auto parts supplier Plastech Engineered Products Inc, saying bail-out options under discussion would have cost the money-losing automaker tens of millions of dollars.
Chrysler is seeking approval from U.S. Bankruptcy Court in Detroit to take tooling from Dearborn, Michigan-based Plastech and shift its business to other suppliers, a move that could cause the parts supplier to fail, Plastech's attorney said.
5 Chrysler plants halt production
By RICK POPELY -- Chicago Tribune
(Updated Wednesday, February 13, 2008, 3:08 PM)
Thousands of workers at five of Chrysler LLC's assembly plants were idled indefinitely Monday after the automaker pulled contracts from a supplier that filed for bankruptcy, interrupting the flow of parts to the facilities.
Chrysler's nine other North American assembly plants also could shut down soon because Plastech Engineered Products Inc., which filed for bankruptcy Friday, produces about 500 parts for Chrysler vehicles and engines.
Chrysler said production wouldn't resume at the idled plants until it receives permission from U.S. bankruptcy court to move tooling for the moldings, interior trim, engine covers and other plastic components bought from Plastech to other suppliers.
"It's indefinite at this point," Chrysler spokeswoman Michele Tinson said as to when workers would be called back
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