The delicate interdependency between automakers and suppliers took center stage again yesterday when Chrysler saw five of its plants shut down when one of its suppliers, Plastech, filed bankruptcy last week.
Plastech has long worn the moniker of “troubled supplier” requiring bailouts three times in the last 12 months, and apparently the Dearborn, Michigan-based supplier’s latest request for help finally sent the new regime at Chrysler over the edge. Chrysler agreed in principle to a plan — along with Ford and GM — on the evening of Jan. 31, then went to court on Feb. 1 asking to get the tooling used to make a variety of components back as well as sending Plastech a “Dear John” letter informing the company that Chrysler was terminating $200 million worth of contracts: immediately.
It’s akin to breaking up with a girlfriend and demanding all your “stuff” back: now.
As one can guess, it went poorly. Plastech hustled into bankruptcy court in Detroit and filed Chapter 11 and blamed Chrysler’s actions for the filing, according to court documents. The end result was no parts were made or shipped and Chrysler couldn’t get its hands on the existing inventory to keep the plants going for a little while longer. Thus more than 10,000 Chrysler employees in four states got to go home early and take today off as well!
Ultimately, the two sides got together and hammered out a temporary agreement before all 14 of Chrysler’s plants were shut down and the five that did get shut down should be up and running as soon as tonight. The whole episode is just a reminder of how dependent both sides are upon one another to get cars and trucks built.
A cynic might argue that it was a chance for Chrysler’s hedge fund owners to serve notice that it wouldn’t be playing by the old rules anymore: pay up, shut up and live with it. Chrysler may affect change in ways that no one expected and suppliers can consider themselves warned.





2 comments ↓
It will be interesting to see how this pans out by the Feb 15 deadline.
Indeed!
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