Agreement ends dispute that idled Chrysler plants

February 5, 2008 12:08:32 PM PST
Chrysler LLC and struStruggling parts supplier Plastech Engineered Products Inc. has agreed to resume sending parts to Chrysler, temporarily halting a financial dispute that had closed four of the automaker's assembly plants.

The deal announced Tuesday in U.S. Bankruptcy Court in Detroit means Plastech would start making interior and exterior parts on its second shift Tuesday afternoon, allowing Chrysler to restart production at the factories.

The four Chrysler plants, as well as one shift at a fifth, were shut down Monday due to a lack of door panels and other interior and exterior parts from Plastech, which has filed for Chapter 11 bankruptcy protection.

Chrysler said in a statement that its factories were going back on-line starting with Tuesday's second shift. About 10,500 workers had been idled by the dispute, which threatened to spread to all 14 of the automaker's assembly plants.

The agreement will last until Feb. 15, with several other bankruptcy hearings scheduled between now and then. But it doesn't settle the dispute, which boiled over in the courtroom Thursday when a lawyer for a group of creditors accused Chrysler of causing the bankruptcy. A Chrysler attorney denied the accusation.

Plastech, which supplies Chrysler with about 500 plastic components for nearly all of its vehicles, sought bankruptcy protection on Friday after the automaker told Plastech it was canceling contracts and seeking other sources for the parts.

The Dearborn-based supplier filed after Chrysler tried to remove tooling to make the parts. Chrysler owns the tooling, which is used by Plastech.

"Chrysler caused this bankruptcy," Frank Merola, an attorney representing a group that holds $100 million worth of Plastech debt, told Bankruptcy Judge Phillip J. Shefferly. "We intend to hold Chrysler fully responsible."

Plastech General Counsel Kelvin Scott told reporters after the hearing that the supplier was forced to seek bankruptcy protection in order to stop Chrysler from taking the tooling.

"We vehemently disagree with the contention that we caused this bankruptcy," Chrysler attorney Mike Hammer told the judge.

At issue now is whether Chrysler can take the tooling back, as it has requested in a lawsuit against Plastech. Further hearings are scheduled for Feb. 13-14.

Without the tools, Chrysler said in its lawsuit that it eventually would have to cease production of vehicles systemwide.

But it also could agree to have Plastech continue making parts, said Chrysler spokesman Michael Palese.

"We try to work out all disagreements in the normal course of business. Anything is possible," he said.

Plastech's contracts with the automaker were worth about $200 million. Plastech does about $1.3 billion in total business, including contracts to supply General Motors Corp. and Ford Motor Co.

GM and Ford said their parts supplies had not been interrupted.

The Chrysler plants that were closed are in Sterling Heights, Mich.; Newark, Del.; Toledo, Ohio; and Belvidere, Ill. A shift also was canceled Monday at Toledo Supplier Park in Toledo.

Plastech has 36 facilities and 7,600 employees in the United States and Canada that make engine covers, grill panels, moldings, metal stampings, door panels, floor consoles and safety restraint system components.