Chrysler rocked by war with supplier

UPDATE #2 Plastech Engineered Products Inc. reached an agreement with creditors and key customers Wednesday that will allow it to keep its plants open at least through Monday, but Chrysler LLC Chairman and CEO Bob Nardelli says his company is finished with the bankrupt supplier, putting its future in doubt. "When a supplier comes to you and says they are no longer financially viable, we have an obligation to respond," he told reporters at the Chicago Auto Show. "It's not adversarial. We're not a predator."

02/05/08 Bankrupt auto-parts maker Plastech Engineered Products Inc. has reached an agreement with Chrysler LLC to resume the supply of parts to the Auburn Hills automaker after a dispute had idled several Chrysler factories on Monday, an attorney said during a bankruptcy court hearing today.

With today’s second shift, Plastech will resume making parts for Chrysler, Plastech lawyer Gregg Galardi said late this morning. The interim deal secures the flow of parts through Feb. 15, he said. It was unclear when Chrysler could resume production; the company did not immediately respond to a call.

Plastech has continued to supply other customers, such as Ford Motor Co. and General Motors Corp., but Chrysler had demanded possession of tooling so other companies could make needed parts.

A hearing in U.S. Bankruptcy Court in Detroit continued this morning, and no other details were released.

02/05/08 Chrysler LLC production could come to a near halt by the end of this week if it can't resolve its dispute with auto supplier Plastech Engineered Products Inc. over tools used to make parts for nearly all Chrysler, Dodge and Jeep vehicles.

Chrysler, which says it idled four plants and 10,500 workers on Monday, canceled its contracts with the Dearborn-based supplier on Friday and has sued the supplier for thousands of molds and dies used to make some 500 parts for its vehicles. That move, Plastech says, forced the supplier to file for Chapter 11 bankruptcy protection the same day, after years of financial problems, in large part because of the rising price of oil, the key ingredient in its plastic parts.

The action by Chrysler, controlled by private equity firm Cerberus Capital Management since last summer, is a sign that the automaker is not going to prop up financially distressed suppliers, said Erich Merkle, auto analyst with Grand Rapids-based IRN Inc.

"Cerberus is coming into it and saying, 'You know what, this isn't the way business should be done.' "

Both companies say they are fighting for their survival.

Without Plastech's tools, Chrysler said its production is at risk. This week alone, the situation stands to cost Chrysler $225 million, Chrysler attorney Michael Hammer said during a court hearing Monday.

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. More at Detroit Free Press