Funds News

UPDATE 1-Getrag says Chrysler terminates supply deal

DETROIT, Oct 17 (Reuters) - Getrag Transmission Manufacturing LLC said on Friday Chrysler LLC had rejected a financing proposal for a planned Indiana plant and terminated a supply agreement with the private German auto parts maker.

Getrag and Chrysler, which is owned by Cerberus Capital Management, had announced in 2007 they would build a $530 million plant in Tipton, Indiana, to produce dual-clutch transmissions starting in 2009, mainly for Chrysler.

The plant was expected to employ about 1,100 workers.

Getrag is still evaluating its options in light of Chrysler’s decision, a spokeswoman said. It also said it would seek reimbursement from Chrysler for expenses incurred by Getrag and its suppliers in the project.

A representative of Chrysler, which is in talks with General Motors Corp GM.N and other automakers about a potential sale of some or all of its assets, could not be reached immediately for comment.

The breakdown of the deal between Getrag and Chrysler is one of several disputes between the automaker and its suppliers to become public in recent months, as Chrysler’s sales have fallen.

The plant has been expected to supply fuel-saving dual-clutch transmissions to Chrysler’s V-6 engine program, codenamed the Phoenix, but has become mired in a longrunning dispute.

Chrysler has not said which U.S. vehicles would get the transmissions. The dual-clutch transmission allows for quicker shifts, saving fuel.

Chrysler sued Getrag over the deal earlier this month, alleging the supplier failed to raise $300 million in debt financing needed to complete the plant.

Getrag said on Friday Chrysler had rejected a financing structure it offered with banks that had required Chrysler to secure some of their obligations under the supply agreement.

Getrag supplies dual-clutch transmissions to Chrysler in Europe for the Dodge Journey crossover, the Dodge Avenger sedan and Chrysler Sebring sedan. (Reporting by David Bailey; Editing by Gary Hill)