Chrysler Seeks Long-Term Supply Fix
A dispute with Plastech cost Chrysler a day of production this week. The parties have a temporary supply agreement, but Jim Press says the auto maker is looking for “some other source.”
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CHICAGO – Plastech Engineered Products Inc. has resumed shipments of components to Chrysler LLC after the financially troubled supplier forced the shutdown of five Chrysler plants on Monday.
But the “interim production agreement” is by no means a long-term fix, Chrysler Vice Chairman and President Jim Press tells journalists at the Chicago auto show here.
Jim Press
“I think we’re fine,” Press says of the temporary deal worked out with Plastech. “I think we’ll be able to get through wherever this takes us to; whatever may be a bridge to some other source. I don’t think we’ll be in a difficult time. But we did have some interruption.”
The controversy started when Plastech filed for Chapter 11 bankruptcy protection Feb.1. Chrysler CEO Bob Nardelli tells Reuters at the show the auto maker tore up its contracts with Plastech because the bankrupt supplier tried to raise prices.
“When we are confronted with a significant price increase, we have to respond in kind,” he tells reporters.
Chrysler attempted on Feb.1 to seize its tooling from Plastech so it could find another supplier to take over the work. If Chrysler and Plastech cannot reach terms on a new contract, the auto maker will have to find another source for the parts by Feb. 15.
Plastech supplies interior, exterior and powertrain plastic components for several key Chrysler products, including minivans, Dodge Ram pickups and the now-in-launch Dodge Journey cross/utility vehicle.
After a 1-day shutdown, production resumed at plants in Belvidere (Rockford), IL; Newark, DE; Sterling Heights, MI; and Toledo, OH.
Plastics suppliers have struggled mightily in the face of high raw-material costs, namely petroleum. Delphi Corp., Visteon Corp. and Lear Corp. are among the major Tier 1 suppliers exiting the interior plastics market. The former Collins & Aikman Corp. was the most infamous casualty in the margin-challenged sector.
Press says Chrysler will continue working with financially distressed suppliers. “We’re all going through tough times, and we’ve got to pull together and work together as best we can,” he says.
But shutting down an OEM assembly plant hurts everyone, he says.
“You feel bad they (Plastech) are going through some tough times,” Press says. “But we’ve got to make sure we’re able to take care of our production of vehicles. We want to make sure our customers who are waiting for cars can get them.”
He declines to reveal how much the 1-day shutdown cost Chrysler.
“It’s really, how much discomfort is it for our customers and our dealers,” he says. “It isn’t about how much money it is. It’s about getting things together quickly and minimizing the pain and getting through it.”
Press says the Plastech episode should not trigger concerns Cerberus Capital Management LP, which acquired an 80% stake in Chrysler last year, is taking a hard-line stance with suppliers.
“It isn’t about the new company,” he says. “It’s about taking care of our customers and taking care of our dealers in a considerate way.”
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