Quality Weenie

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