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Chrysler Sues Daimler Over Supply Shortcomings

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Having just come through a complicated series of bankruptcy proceedings, you might think Chrysler would want to take a break from courtrooms for a while. However, on August 21 the company filed suit against its former parent, Daimler AG, in U.S. bankruptcy court. According to Chrysler, Daimler has reneged on supply contracts, and the resulting lag in vehicle components has the potential to affect Chrysler's production at facilities in the U.S. and Canada.

The trouble began when Chrysler was accused of owing Daimler €55 million ($78.7 million) because Chrysler didn't purchase as many of Daimler's 2.2-liter diesel engines as it said it would. (Chrysler uses those engines in some of its European models, including the on-again, off-again PT Cruiser.) In retaliation for that alleged debt, Chrysler says that Daimler has refused to provide steering columns and torque converters that Chrysler needs for production -- or, less genteelly, those components are being held ransom until Chrysler ponies up. At stake: production of the Jeep Grand Cherokee in Detroit, and the Dodge Charger, the Dodge Challenger, and the Chrysler 300/300C in Ontario.

Chrysler says that problem with Daimler and the diesel engine orders "was resolved in an April 17, 2009, pre-petition agreement that settled a number of disputes between Daimler and the old Chrysler." Translation: "Even if there were a problem -- and there isn't -- it would involve Daimler's negotiation with Old Chrysler. But Old Chrysler doesn't live here anymore."

Until everyone is able to keep Old Chrysler and New Chrysler (not to mention Old GM and New GM) straight in their heads and in their ledgers, we have a feeling this sort of thing may pop up again.

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Comments (3)
  1. As a former Daimler/Chrysler stockholder I can attest to the contempt and resentment shown to Chrysler by foreign stockholders. This unrelenting bias and arrogance led directly to a souring of this alliance,the looting of Chrysler cash reserves by Daimler and the forced deminishment of the Chrysler product line.
    The apparent respect and commitment of Fiat to a proud Chrysler of true inherent value and ability just infuriates Daimler. The prospect that a European rival will enhance Chrysler and actually partner with Americans as equals and succeed in an honorable way is intolerable to their ego. I'm not surprised by this "blackmail".
    I sincerly believe this partnership will succeed to the embarasement of Daimler, whos' stock I sold(at a nice profit,thank you) with relish as a proud American and Chrysler loyalist.
     
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  2. Chrysler could purchase and sell the number of diesel engines that it agreed to do if they could have certified, like VW, the engine and offered those vehicles here in the US. The public and Feds want and are crying out for fuel efficient vehicles such as vehicles equipped with this engine -- particularly the PT Cruiser. If Chrysler had done so, it could have possibly made a bigger splash than Ford with Cash for Clunkers. The new Chrysler appears to be a lot like the old Chrysler to me!
     
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  3. @Bill: I think that's an EXCELLENT take on the matter. I would only add that the blow to Daimler might've been somewhat softened by the fact that Fiat is Italian. Had it been a German automaker with which Chrysler had partnered... Yeesh.
     
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