February 06, 2008

Chrysler Up and Running

News reports are saying that Chrysler is back up and running.

How is that possible?

On Friday is was reported that Plastech stopped making parts for Chrysler, Chrysler was going to pull the tools and ended up shutting down 4 plants because they ran out of parts. Yes on Tuesday evening they started back up again?

Chrysler reached an interim agreement with Plastech Engineered Products Inc. Tuesday that allowed the automaker to resume production at four plants idled Monday by a contract dispute with the supplier that threatened to shut down all of Chrysler's assembly sites.

Plastech wouldn't have made any parts for Chrysler until the settlement was reached, and they shouldn't have had any parts in stock because Chrysler shut down 4 plants because they had no stock.

From my been there, done that experience there is no way in hell Chrysler would have had enough parts to run shifts starting Tuesday night. Plastech couldn't have run parts for Chrysler for 24 hours because they have other customers that still need parts too.

Something does not smell right at all, there is so much to this story that we are not hearing about.

Chrysler acknowledged in court filings that it and other automakers entered into an "accommodation agreement" with Plastech to help it avoid bankruptcy. But Chrysler lost patience and demanded that Plastech return the tools needed to manufacture its parts.

That prompted Plastech to seek bankruptcy protection, according to the company's general counsel, Kelvin Scott. "That was the only way we could stop them," he told reporters after Tuesday's hearing. "Otherwise, we had no intention of filing."

So what Plastech is saying the only reason they filled for bankruptcy was so Chrysler couldn't have their tools.

Others sources said Plastech was already in serious financial trouble, in part because of rising resin prices exacerbated by declining production at the automakers. Plastech also had defaulted on some loan covenants and was heavily in debt. Chrysler, burned by the failed bailout of Collins & Aikman, didn't want to participate in another financial rescue of a failing supplier.

Plastech is not the only one pointing a finger at Chrysler.

"Chrysler caused this bankruptcy," said attorney Frank Merola, who represents creditors in the Plastech case. "We intend to hold Chrysler fully responsible."

He objected to keeping the details of the agreement between Plastech and Chrysler secret, but the court said it had no authority to rule on it during Tuesday's hearing.

Chrysler denied provoking Plastech's bankruptcy filing, as did Cerberus. "We didn't toss them out of business. Why would we want to do that?" asked Tim Price, a Cerberus managing director who said the decision to demand the return of Chrysler's tooling was made at its Auburn Hills headquarters -- not in New York.

So Plastech is blaming Chrysler, yet others say Plastech was already headed down that road.

In my opinion it sounds like Plastech is setting up a situation to sue Chrysler. Why do I think that? Because of this line from Plastech lawyers ...

"Chrysler caused this bankruptcy," said attorney Frank Merola, who represents creditors in the Plastech case. "We intend to hold Chrysler fully responsible."

Maybe they found a way to blackmail Chrysler into keeping the $200 Million worth of contracts at Plastech.

This could get as interesting as the circus surrounding Detroit's Mayor right now!


Posted by Quality Weenie at February 6, 2008 06:38 PM | TrackBack
Comments

As Guyk would say: "Good God Girty what a Gash!"

Subterfuge and corporate politics in D town.

Posted by: pam at February 7, 2008 09:05 AM

From my experience in the auto supplier world, I'll give you my take.

Yes, it's investment to have new dies/tooling made, but....if you KNOW you're gonna pull the business you bite the bullet and spend the dough. Then...when the new supplier is up and running you pull the plug.

We did that to several of "our" suppliers and it's one reason I no longer work in that world anymore. I don't play THAT KIND of dirty.

We'll probably never know the WHOLE story, like you said. I'm willing to bet there is dirty all over this.

Man...as bad as things get in Consumer Products, I don't miss this crap AT ALL....

Thanks for keeping us informed.....

Posted by: Tammi at February 7, 2008 11:49 AM

Where ever I have been in this situation tools were pulled, never re-made (especially in this economy, wasteful).

What Chrysler did wrong is that you don't tell your supplier your pulling your tools and show up a couple days later to get the tools.

You show up at their door (usually 3rd shift, around 1-2am) with a huge truck and walk in with your biggest guys with your own hi-lo and go in and take the damn things.

And no, I am not kidding. Have been at suppliers that have done that and at suppliers that has had it done to them.

It's a dog kill dog world in automotive plastics, because plastic suppliers are a dime a dozen.

Posted by: Quality Weenie at February 7, 2008 12:07 PM

"You show up at their door (usually 3rd shift, around 1-2am) with a huge truck and walk in with your biggest guys with your own hi-lo and go in and take the damn things." Yes, that is EXACTLY right....

I've just seen that many times, you HAVE to have the tools remade, because rumors run wild, it's never REALLY a surprise so it's amazing how often the tooling is "damaged" before you show up...

But then again, I've always worked the steel stuff....so there's that.

But no matter what, this does stink to high heaven.

Posted by: Tammi at February 7, 2008 02:24 PM