Chrysler to sever ties to bankrupt supplier

2/7/2008

Chrysler LLC plans to end its relationship with a Dearborn, Mich., supplier whose bankruptcy Friday disrupted production at several Chrysler plants, including the Toledo Jeep Assembly complex and Toledo Machining.

Speaking during the press preview of the Chicago Auto Show yesterday, Chrysler Chief Executive Robert Nardelli said his company will shift contracts for more than 500 parts from Plastech Engineered Products Inc. to other suppliers.

A price increase sparked the automaker's decision to terminate its contracts with Plastech, but it was unable to retrieve its tooling from Plastech because of the supplier's Chapter 11 bankruptcy filing. As a result, Chrysler plants didn't have needed interior vehicle parts, so production was halted in at least three assembly plants for a while this week.

"I think the lesson here is that we have to run a business, and we have to make sure we're getting the right value from our suppliers," Mr. Nardelli said. "When we're confronted with a significant price increase, we have to respond in kind."

He did not identify which suppliers might be asked to handle Chrysler's work.

On Monday, Chrysler and several of its suppliers sent home workers in Toledo when the company ran out of Plastech parts for new Jeep vehicles. Plastech makes about six dozen parts for the Jeep Liberty and Dodge Nitro and about two dozen for the Jeep Wrangler, United Auto Workers officials said.

Chrysler operates many of its supplier agreements on a "just-in-time" basis, so inventories of the parts are limited as vehicles are being made. If delivery stops, production stops.

Chrysler spokesman Roger Benvenuti said workers on the second shift of Toledo Jeep's Liberty and Nitro line "worked three hours and were sent home" Tuesday evening because of a lack of parts.

Yesterday, the line was "up and running normal," he said, adding that the Wrangler line was not affected yesterday.

Dan Henneman, UAW Local 12 leader at Toledo Jeep, said workers made fewer than four dozen Libertys and Nitros Tuesday before being sent home. He said Wranglers manufactured on Tuesday were parked outside awaiting one part from Plastech, which was installed yesterday morning.

A load of parts from Plastech's plants in Monroe County's Frenchtown Charter Township "arrived at 6 a.m., and we ran all day without problems," Mr. Henneman said.

Also speaking to reporters in Chicago yesterday afternoon, Jim Press, Chrysler's president and vice chairman, said plants were running and that he hoped any lost production would be made up "before April."