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April 30, 2009

Suppliers balk, shutting 3 plants

Chrysler’s bankruptcy filing triggered an immediate and unplanned shutdown at plants through metro Detroit as suppliers stopped shipping parts out of fear they won’t be paid.

Workers were sent home from Warren Truck, Warren Stamping and Sterling Stamping plants this afternoon. The company plans to temporarily close all its factories beginning next Monday and continuing through the bankruptcy process, but the immediate shutdowns illustrate how easily what has been billed as a “surgical” bankruptcy can quickly become messy.

“Suppliers have decided not to ship product,” said Tom LaSorda, Chrysler vice chairman who announced today he is retiring. “It’s not in every facility. It was going to happen on Monday anyway. Hopefully suppliers will continue to supply us.”

While the company planned to halt production to pare inventories, some of the plant idlings likely will be permanent closings.

“There will be further capacity rationalization (plant closings),” LaSorda said. “The plants have been identified and we’ll have to work through that.”

Among the changes in the UAW contract are modifications to the supplemental unemployment benefits so workers whose plants close for weeks or months at a time will receive less during the idling than they have in the past. LaSorda said most UAW workers would receive about 80% of their normal pay while they are laid off.

Chrysler declined to identify the suppliers who have stopped shipping. Given that at least two stamping plants closed, it’s likely there was a disruption in the supply of steel.

Sources close to President Barack Obama’s auto task force said the Treasury Department will provide $3 billion to $3.5 billion of financing to Chrysler during bankruptcy to assure it can pay suppliers. Apparently that wasn’t enough for some suppliers.

LINK:Suppliers balk, shutting 3 plants | | Detroit Free Press
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