Chrysler Closes Plants in Dispute with Supplier

DETROIT (Reuters) – Chrysler LLC has closed four assembly plants andmay be forced to shutter the rest of its global assembly operationswithin a short time due to a dispute with supplier Plastech EngineeredProducts Inc, which filed for bankruptcy court protection on Friday.

The dispute has so far not affected Plastech’s other customers, including General Motors Corp, Ford Motor Co and Toyota Motor Corp. 

Chrysler, which terminated all its contracts with Plastech on Fridaydue to the supplier’s "ongoing financial struggles," said in documentsfiled with the U.S. Bankruptcy Court in the Eastern District ofMichigan that it may be forced to quickly close 12 assembly plantsaround the world because the supplier is no longer shipping parts tothe Chrysler plants.

The U.S. automaker’s plants operate on a "just-in-time" basis, whereparts are shipped as needed so any disruption would be immediately felt.

"Even a short term interruption … will inevitably lead to theshutdown of more production lines at Chrysler," the automaker said inits objection filed on Saturday.

The closed Chrysler plants are in Rockford, Illinois; Newark,Delaware; Sterling Heights, Michigan, and Toledo, Ohio. The automakeralso said its Toledo supplier park has eliminated a work shift.

The Plastech parts are also used in various Chrysler engine plantsand international facilities where vehicle kits are shipped for finalassembly, according to court documents.

Chrysler has asked the court for "immediate relief" to allow it totake its tooling equipment from the Plastech plants so it can beshipped to another supplier.

Plastech, a privately held minority-owned supplier based inDearborn, Michigan, provides Chrysler with hundreds of parts, includingdoor panels, floor consoles and engine covers, that are used in theassembly of almost all of Chrysler’s vehicles — almost 2.3 million peryear.

Plastech, which was founded in 1988, has 35 facilities and 7,700 employees in the United States and Canada.

Chrysler and "various other customers" of Plastech provided thestruggling supplier with $46 million so it could continue to supplyparts, according to court documents. Chrysler said it kicked in $6.9million of the total.

That group included GM and Ford, both of which said on Monday theywere still receiving parts from Plastech and production had not beenaffected.

"We’re working with Plastech to make sure that we have continuity ofparts and components to keep our factories operating," Ford spokesmanTodd Nissen said. "We’ve not had any production disruptions and don’texpect any."

Plastech makes a number of different parts for Ford, its largestcustomer, including plastic interior and exterior parts for suchvehicles as the Ford F-150 pickup truck and the Ford Edge crossovervehicle. Plastech makes various parts for GM, including door handlesand bumpers.

Other customers include Toyota and Johnson Controls Inc. Toyota said it had not been affected and Johnson Controls was not immediately available for comment.

Along with that initial payment from the customers, Chrysler saidPlastech agreed all tooling would belong to the respective customersand they would have the right to take possession of the equipment atany time without payment, according to court documents.

However, Plastech came back to Chrysler and said it needed moremoney so Chrysler and the other customers entered into a secondagreement on January 22, under which Chrysler accelerated $10.7 millionin payments to Plastech under existing contracts, according to courtdocuments. In total, the customer group gave Plastech $40 million inaccelerated payments.

Chrysler decided to take possession of the tooling, getting a WayneCounty Circuit Court to give it a temporary restraining order thatallowed the automaker to send "a team of trucks" on Friday to thesupplier’s plants, according to court documents. However, Plastechfiled for bankruptcy to prevent that.

Plastech was "clearly using the automatic stay as a sword …assumingly in hopes of extracting additional financial accommodations,"Chrysler said in court documents.

Chrysler said Plastech had caused "tremendous jeopardy" by stoppingproduction of parts for the automaker and refusing to release thetooling equipment so Chrysler can have other suppliers build the parts,according to court documents. It asked the bankruptcy court to allow itto take control of the tooling equipment.

(Editing by Maureen Bavdek)

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