Supplier Bankruptcy/Dispute Idles Chrysler Plants

No one said that procurement/supplier relationships in Detroit were approaching a level which we could describe as peachy. But with a new procurement leader taking over at Chrysler, I would have thought they would have been able to avoid situations like this. In the above linked Wall Street Journal article, the authors describe how Plastech, a supplier to Ford, GM and Chrysler, stopped shipping parts to Chrysler just as it filed for bankruptcy protection (Ford's and GM's supply continued on as normal). After this article was written, Chrysler finagled a new deal with Plastech -- and parts production has resumed. But these strong arm tactics show that old-school Detroit purchasing stand-offs are alive and well. According to the article, "As parts deliveries from Plastech dried up, Chrysler announced Monday it had halted production at factories in Belvidere, Ill.; Newark, Del.; Sterling Heights, Mich.; and Toldeo, Ohio."

Since production just resumed, it's clear this was just a temporary supply disruption. Still, in an increasingly tough automotive market, one wonders if these types of stand-offs will become even more common and if the OEMs will have to serve as banks of last resort (either through formal loan structures or via EIPP types of payables financing capabilities). In this regard, the Journal notes, "Auto makers in the past have aided suppliers to keep them out of bankruptcy and avoid potential production disruptions on various vehicles ... Ford's policy has been to help some suppliers 'improve the quality and production coming out of their plants,' ... though 'it isn't the company's role to hand out money to suppliers.'" To this I might add, not unless their back is up against the production wall!

- Jason Busch

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