Troubled Chrysler supplier Plastech's bankruptcy proceedings just got a little more complicated. Automotive News [AN, sub] reports that Johnson Controls Inc. (JCI)– which accounts for over half of Plastech's $1.4b annual business– filed a motion yesterday to force the plastics manufacturer to either accept or reject their sourcing agreement. In the motion, JCI claims that Plastech is incapable of producing the 6000-odd parts it sells to Johnson at the agreed price; an issue which has forced JCI to "bail-out" Plastech several times in recent years. Although firms in bankruptcy usually take several months to arrange a reorganization plan before accepting or declining contracts, JCI argues that it can't afford to wait. "If the debtor cannot assume the (agreement) and perform according to its terms, the debtor cannot reorganize." The key issue appears to be Plastech's ability to secure capital coming out of bankruptcy. JCI, Chrysler and other Plastech customers have made it clear that they will no longer pay out lump sums above the negotiated cost of sourced parts. Meanwhile, Plastech's $31m line of credit is nearly gone. The firm has 15 days to respond to JCI's motion. This is getting really ugly really fast.
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So the race to the bottom continues, eh? Outsourcing and just in time manufacturing converge into disaster.
The disaster stems from forcing critical part suppliers to price the parts at a level to put them out of business. Toyota and Honda don’t seem to have this problem. Its the same F*** the other guy mentality that will always come back two fold.
Interesting take on the Plastech saga from a Detroit insider, if you can get beyond his negative views on affirmative action, you’ll see a company that was mismanaged from the start.
http://journals.aol.com/chicknwire/WiresWeeklyWordsofWitandWisdom/entries/2008/02/02/what-goes-around-comes-around/138
Since there’s so much crap going on these days in the supply chain, here’s a search on Google News for the Detroit 3 and their suppliers.
I think Plastech pulled the rip cord too late.
quasimondo: nice story link. Very enlightening. Thanks.
But alas, not the least bit surprising.