Chrysler closes plants in dispute with supplier
DETROIT (Reuters) - Chrysler LLC closed four U.S. assembly plants on Monday and may be forced to shutter the rest of its global assembly operations shortly due to a dispute with supplier Plastech Engineered Products Inc, which filed for bankruptcy court protection.
The bankruptcy has so far not affected Plastech's other customers, including General Motors Corp GM.N, Ford Motor Co (F.N) and Toyota Motor Corp (7203.T).
Chrysler, which terminated all its contracts with Plastech on Friday due to the supplier's "ongoing financial struggles," said in documents filed with the U.S. Bankruptcy Court in the Eastern District of Michigan that it may be forced to quickly close 12 assembly plants around the world because the supplier was no longer shipping parts to the Chrysler plants.
The automaker's plants operate on a "just-in-time" basis, where parts are shipped as needed so any disruption would be immediately felt.
"Even a short term interruption ... will inevitably lead to the shutdown of more production lines at Chrysler," the automaker said in its objection filed on Saturday.
On Monday, Judge Phillip Shefferly refused to take immediate action on Chrysler's request to seize tooling equipment it claims belongs to it, but is held by Plastech. Chrysler wants to move the equipment to another supplier.
"I still think we have to do this in an orderly way," Shefferly said in the Detroit court.
"It's tough to litigate at such short notice," he added, urging both sides to negotiate ahead of the hearings.
Plastech said in court documents that many of the moldings Chrysler wants are attached to assembly lines used to build parts for other customers. It also said it could take weeks or months to get the moldings properly set up elsewhere. It also questioned whether Chrysler actually owns the equipment.
Michael Hammer, an attorney for Chrysler, told Reuters the automaker could close another four assembly plants later on Monday.
"We may have to take moves to protect that production," he said after the court hearing.
A Chrysler spokesman said it was too soon to say what impact the dispute could have on first-quarter production.
The four plants already closed are in Rockford, Illinois; Newark, Delaware; Sterling Heights, Michigan, and Toledo, Ohio. The automaker also said its Toledo supplier park has eliminated a work shift.
Plastech parts are also used in various Chrysler engine plants and international facilities where vehicle kits are shipped for final assembly, according to court documents.
Plastech, a privately held minority-owned supplier based in Dearborn, Michigan, provides Chrysler with hundreds of parts, including door panels, floor consoles and engine covers, that are used in the assembly of almost all of Chrysler's vehicles -- almost 2.3 million per year.
Plastech, founded in 1988, has 35 facilities and 7,700 employees in the United States and Canada.
Chrysler and "various other customers" of Plastech provided the struggling supplier with $46 million so it could continue to supply parts, according to court documents. Chrysler said it kicked in $6.9 million of the total.
That group included GM and Ford, both of which said on Monday they were still receiving parts from Plastech and production had not been affected.
Other customers include Toyota and Johnson Controls Inc (JCI.N). Toyota said it had not been affected and Johnson Controls could not be reached for comment.
Plastech said its liquidity had been reduced due to the downturn in the domestic auto market and rising commodity costs, according to court documents.
It had hired Conway, MacKenzie & Dunleavy as financial advisers and Lazard Freres & Co LLC as investment bankers to explore options, including the sale of some or all of its business, according to court documents.
(Additional reporting by David Bailey in Chicago)
(Editing by Richard Chang, Leslie Gevirtz)
