The Detroit Free Press reports that Chrysler has extended its short-term agreement with bankrupt supplier Plastech. The deal was expected by industry observers after Chrysler lost a court battle to strip Plastech of the toolings required to manufacture many of the plastic components in Chrysler's vehicles. The previous interim agreement was scheduled to lapse tonight, potentially stopping production at other Chrysler plants, but the extension will keep factories open through at least March third. This incredibly short-term measure keeps the prospect of further wrangling between Chrysler and its troubled supplier on the front burner. Between Plastech's reputed quality issues, Chrysler's clearly adversarial attitude towards its supplier and the ongoing resolution of Plastechs $488m in debts, this story is just starting to get interesting. Watch this space.
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Why can’t Plastech and Chrysler just kiss and make up? They have so much in common. For example, cash flow problems.
Chrysler says Plastech assigned it the rights to certain equipment in exchange for interim financing. A report in this space yesterday said Plastech’s accounts with some original suppliers are in arrears. The third party suppliers may have a first right to the equipment. If so, this is real close to something called fraudulent conveyance in these parts.
I checked out Plastech’s site and they appear to be doing part or all of the interior plastics in the F150 and Lincoln MKX.
If Plastech’s quality is that bad, wouldn’t it stand to reason the issues would be showing up in the two Ford models too?
Of course they still have the cash flow issue to iron out which should be interesting in light of the new issues that are cropping up.
I still don’t get it. Doesn’t Chrysler OWN the tools to make the parts?
I woudn’t put to much stock in the supposed “Quality Issues” with Plastech. Having worked for a number of years as a customer quality rep for a supplier to Chrysler I have seen many times where the suppossed Quality issues are linked to what the program managers like to call “commercial issues”. All of a sudden your returns will go up, you are inundated with 8D requests for product that they can not tell you what is wrong with it, and we could find nothing wrong. After the finance guys do some bargaining, resulting in money in Chryslers pocket, the problems magically go away. That is why the suppliers are in trouble, the big 3 has beat the suppliers down to were it is hardly worth doing business with them, and some of them have just plain had enough. Several years ago Chrysler just deducted a percentage of a suppliers invoices, and then sent back a cheque for the new amount. I thought I would try that with my car loan to Chrysler, just cross out the 373.00, deduct 10% and remit the balance. Some how I don’t think Chrysler would have thought that was proper business. Anyway interesting to watch the chickens come home to roost.