Supplier Could Bring Chrysler to Its Knees

February 5, 2008
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It could be a tough week for Chrysler as it escalates a battle with the newly bankrupt supplier Plastech-engineered products. As of Monday, four Chrysler plants, including the factory in Sterling Heights, Michigan, that produce the Chrysler Sebring sedan, have been forced to close due to a lack of plastic interior pieces produced by the Dearborn, Michigan component maker. A total of 10,500 workers have so far been idled.

Still more Chrysler plants could close in the coming days, including two key assembly lines in Ontario, and some analysts believe that the automaker, heavily dependent on the struggling supplier, could be virtually brought to its knees if the dispute isn’t resolved quickly.

Minority-owned Plastech is just the latest in a series of U.S. automotive suppliers to fall into Chapter 11, but as it attempts to reorganize, it has been hoping for some financial assistance from Chrysler, itself deeply in the red. The automaker’s new private equity owners, Cerberus Capital Management, have balked, canceling their contract with Plastech, triggering the parts cut-off.

Chrysler has gone to court, claiming the supplier made “extraordinary economic demands,” and hoping to get approval to retrieve the tools used to make interior trim and other plastic parts. It would then try to take the tools – used to produce a total of 500 different plastic pieces – to another supplier.

While Chrysler is a major client of Plastech’s, the company supplies a number of other automakers, including Ford. On Monday evening, Ford’s President of the Americas, Mark Fields, told that his company intends to continue working with Plastech, if possible. But Fields declined to say if Ford is taking specific steps, above and beyond its contract, to help keep the supplier alive.

2008 Dodge Challenger SRT8 Preview by Marty Padgett (1/23/2008) A Chicago show debut, just in time for CAFE.

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