Chrysler Sues Daimler Over Supply Shortcomings

August 26, 2009


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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