February 04, 2008

Plastech Screws Chrysler Screws Plastech

There is so much wrong doing on both sides it's hard to keep track.

Plastech is a huge plastic part supplier in the automotive industry.

I hate dealing with them because they have a holier then thou attitude and their quality sucks, big time.

But they are "minority owned" and the owner just happens to be married to a big shot at Ford. Gee guess you can figure out how they are still in business and where they got a lot of their business from *wink wink*

Chrysler reports they are having to close down plants because Plastech is no longer making their parts.

Chrysler LLC has closed four assembly plants and may be forced to shutter the rest of its global assembly operations within a short time due to a dispute with supplier Plastech Engineered Products Inc, which filed for bankruptcy court protection on Friday.

But reading further you find out that Chrysler is in a pissing match with Plastech and went and just up and cancelled all their contracts with Plastech.

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 is no longer shipping parts to the Chrysler plants.

Chrysler makes it look like Plastech is trying to blackmail them by asking for more money and more money for Chrsyler to pull their tooling out of Plastech plants.

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.

Along with that initial payment from the customers, Chrysler said Plastech agreed all tooling would belong to the respective customers and they would have the right to take possession of the equipment at any time without payment, according to court documents.

However, Plastech came back to Chrysler and said it needed more money so Chrysler and the other customers entered into a second agreement on January 22, under which Chrysler accelerated $10.7 million in payments to Plastech under existing contracts, according to court documents. In total, the customer group gave Plastech $40 million in accelerated payments.

But Chrysler is also saying that Plastech just decided to stop producing their parts and won't release their tooling and Plastech is at fault for Chryslers work stoppage.

I am calling bullshit on both sides here.

Plastech has a contract stating they are to make parts for Chrysler, even with Chrysler pulling their contracts Plastech has an obligation to fullfill until the tooling is gone.

But ...

Something just doesn't smell right at Chrysler.

One, you don't just up and announce you are ending all the contracts and want your tooling now.

You inform that on a certain date you will be ending your contract and want your tooling. You have them build banks of parts to last you until the new suppliers are up and running.

New suppliers, when pushed under extreme circumstances to get things up and running immediately will need at least 2-3 weeks. Its not like they can just pop the tooling into their machines and start running it. Been there, done that, it's not for the faint of heart.

Chrysler knows this, that is why something smells fishy at Chrysler.

Could this be the beginning of the end that Chrysler is looking for?

Posted by Quality Weenie at February 4, 2008 02:48 PM | TrackBack

Wow, it's a vicious circle!

Posted by: pam at February 4, 2008 03:43 PM

Agreed - bullshit on both sides. I'm so glad I don't have to deal with Plastech anymore, and perhaps never again after this. They are arrogant, the treat their own people like crap and their customers even worse. There's probably so many complaints about Plastech from various Quality functions that Purchasing departments have given up on trying to resolve any of them, even the most egregious.

I also agree that it will be extremely difficult to pull tools and get production up & running at other suppliers. Margins in plastic molded parts are so small, many suppliers may not even want the business at the same prices that Plastech was already getting, not to mention the further price reductions that Chrysler wants every year. (I certainly wouldn't if I were a mold shop). But they may have to do so, just to keep their machines running.

Then think of it from the point of view of the staff at Chrysler. Since most of the parts are interior components, they all have to go back through the AAR approval process all over again. Just imagine if you were part of the team - probably a half-dozen people - working up at the Chrysler interior studio on Brown Rd, knowing that hundreds, perhaps thousands, of resubmissions in dozens of colors were going to be coming in and need quick turnaround in order to allow shipments and get plants back up & running. If I worked there, I might be driven to consider swallowing a revolver barrel.

Perhaps it's actually to Chrysler's advantage that they have SOOOO many cars & turcks out there that NOBODY wants, so they can afford to shut down for a couple months in most cases, drain out the inventory levels, and take time with the acquisition and re-sourcing process. Only two platforms have inventory levels less than 60 days (I'm guessing RT and perhaps PM/MK, though not sure).

Who knows, they might actually get BETTER parts after this is all done. (Not that that will make the whole interior of any Chrysler product any better.)

Then again, this may turn out like "Blackhawk Down", where JCI just went in and bought out Blackhawk Plastics, machines and all, to keep things running for various GM programs. But Chrysler's actions thus far don't signal such a move to me.

Isn't it funny, though (and perhaps you nailed it) that GM and Toyota are not suffering from this crisis (according to the Wall Street Journal, where I found the link to your blog!). I'm guessing Ford isn't suffering yet either, but may be next since they don't have cash to pump into an ailing supplier.

It's funny that neither Toyota nor Ford are suffering right now (or not yet). Perhaps (Daimler)Chrysler's long-standing record of poor supplier relations (which is getting no better as "The New Chrysler") may be just as much to blame for this scenario playing out. Chrysler's rape-and-pillage policy at all stages and facets of program development rubs even the nest and most stable suppliers the wrong way. I'm absolutely convinced that asshole-ness is a required personality trait for Chrysler managers and supervisors. (However, I must admire the sheer balls they have to decide on new changes to the Process Sign-Off v5.5, while not telling suppliers until 1/31/08, yet making them retroactive to 12/11/07.)

If this plays out as it appears, with Chrysler pulling tools and finding them happy new homes at various other suppliers, I can see them forcing through the approval process, or perhaps bypassing the process in part or even in whole, in order to get plants running again (even paying OT to do so), just to fill the pipeline with more unsold vehicles to creater ever-more-bloated inventories.

In other words, it would be another example of Chrysler holding itself to a lower standard than it forces upon its suppliers.

(Whew. I'm exhausted from venting.)

Posted by: Raj Against The Machine at February 4, 2008 11:17 PM

Thanks for stopping by Raj and you hit on a point that I think makes a lot of sense.

Did Chrysler do this to make themselves look better, instead of annoucing shuttering a lot of plants to get inventory down and make themselves look real bad they took this opportunity to shutter nearly the entire company to get inventory down and they don't look like the bad guys.

Talked with Mr Weenie last night about this and I came to this conclusion during our discussion.

Posted by: Quality Weenie at February 5, 2008 08:14 AM

Interesting comments but I must correct you on a point. Julie Brown owns Plastech and her husband works for her at Plastech. He left Ford over 10 years ago on less than perfect terms. He had zero influence in helping her secure business with Ford. Julie did this herself.

Posted by: Kan Kan at February 6, 2008 11:23 AM

Just weighing in from a different angel. I have some expierience at a Tier I competitor and I wonder if we will see any of this business pulled coming our way? We have lost programs to Plastech in the past because of pricing. They undercut the market prices to win business and now can't deliver product at those prices. I just don't see this as the OEMs fault. We quote certain margins to maintain profitability and do get business. When a competitor undercuts ridiculously and can't make up that margin, they are SOL and we are happy to help. If you can't make money, get out. Most of the programs they are in trouble on were awarded in the last 5 years. I also heard they weren't playing ethically and may have molded patented designs in-house illegally instead of using the directed Suppliers. Interesting. I think this plot will thicken in the next few weeks.

Posted by: Miss Kar at February 6, 2008 04:47 PM

So Kan, you work at Plastech right.

What about the other couple of executives that left Ford recently and went over to Plastech?

Why is it nobody at Ford that wants to resource to other suppliers from Plastech is allowed?

Plastech is getting what they deserve. They under bid to get business and now think they can blackmail the auto makers into giving them more money. Maybe they should have taken a couple lessons from Collins & Aikman.

No help from Ford in getting her business off the ground, ya right.

Posted by: Quality Weenie at February 6, 2008 06:18 PM

Miss Kar, you hit the nail on the head.

Sounds like Plastech is following the Collins & Aikman way of doing business.

C&A under bid almost everything just to get the business and then tried to get more money after launch but couldn't.

In the end C&A's greediness to get business is what put them under and I see Plastech going the same way.

Posted by: Quality Weenie at February 6, 2008 06:20 PM

No, I don't work at Plastech. I was just correcting your comment that her husband is a Ford employee and responsible for sourcing her business.

Posted by: Kan Kan at February 6, 2008 07:14 PM

So I am hearing this morning that there is more to the story as Chrysler's CEO has said to the media that the reason for the cancellation of the contracts was because of proposed price increases and that Chrysler is terminating its relationship with Plastech as a Supplier. I am confused - doesn't this still have to go through court to have the Chrysler tools removed from the building? Anyone weighing in on this latest statement from Chrysler?

Posted by: Miss Kar at February 7, 2008 11:26 AM

From what I have heard, there is an extension period of the contracts until things get worked out, but Chrysler is still planning on pulling their tools.

I don't blame Chrysler, probably tired of putting up with Plastechs bullshit and horrible quality.

I know there has to be more to the story then either side is putting out there. Kind of like Detroits mayor hiding his secret affair and then agreeing to a secret deal to keep his secret affair secret.

Posted by: Quality Weenie at February 7, 2008 12:10 PM

Chrysler is the one that is screwed here. They are going to find out very quickly that they own maybe - and I mean maybe - 5-10% of the tools they think they do.

And that's not to mention that Plastech has so much experience at automotive litigation that Chrysler really does not stand a chance.

We'd love to have some of Plastech's business, but there is no way on earth to effect this kind of scale of a transfer in the timing that Chrysler wants - and that's if we wanted to accept the work at Plastech's prices (we don't and won't) and if Chrysler owned the tooling to begin with (which they clearly don't).

I feel so sorry for anybody that goes to purchase a Chrysler product if the courts allow them to go thru with a unorganized crazy stunt like this. The quality and safety problems that will result from Cerberus short cutting the production part approval process should be enough to scare anyone away.

This is what happens when you hire a clown from Home Depot to run an auto company. He will be responsible for costing Chrysler many hundreds of millions of dollars more on this deal, Plastech will keep the business anyway, Cerberus will fire him, and then they will hire another clown from Lowe's or Kmart to do it all over again. Idiots.

Posted by: Jim at February 9, 2008 08:38 PM