Not to be alarmist (much), but TTAC has been saying for some time that the collapse of Detroit's domestic supply chain could force one or more of the automakers into bankruptcy. On Friday, Chrysler canceled its contract with Plastech Engineered Products (PEP) of Auburn Hills, MI. Plastech immediately filed for bankruptcy and stopped shipping parts to Chrysler. USA Today reports that a lack of plastic parts has forced the American automaker to suspend operations at four U.S. assembly plants: Sterling Heights, Mich. (Sebring and Avenger); Newark, Del. (Durango and Aspen); Toledo, Ohio (Nitro and Liberty); and Belvidere, Ill. (Caliber, Compass, Patriot). While Chrysler should be able to reestablish parts production (e.g. engine covers, grill panels, moldings, metal stampings, door panels, floor consoles), we hear that Chrysler's been slow paying all its suppliers. If suppliers see this move as a sign of things to come, they might reach the point where they demand cash up front– tipping Chrysler into bankruptcy. Watch this space.
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I don’t know what’s worse, the fact that Chrysler had to shut down its plants or the fact that between the Sebring, Avenger, Nitro, Liberty, Caliber, Compass, Patriot, Durango and Aspen there isn’t even one competitive car on that list.
And if Plastech was responsible for any of the atrocious interiors that have (dis)graced Chryslers over the past 5 or so years, then good riddance
From Crain’s Detroit Business last week:
A proposed $200 million bailout to stabilize the Dearborn-based maker of interior trim, wiring harnesses and cockpit modules is uncertain because “there is a lot of buck passing” among the four parties tapped for help, says a source who is taking part in the negotiations.
The four parties — General Motors Corp., Ford Motor Co., Chrysler LLC and Tier 1 supplier Johnson Controls Inc. — are still smarting from their unsuccessful $46 million bailout of Plastech in early 2007.
The latest Plastech crisis comes at a difficult time for automakers. Each has a group of struggling suppliers, and more supplier failures are expected if North American light-vehicle production falls to the range of 14.3 million units, as some analysts predict.
“And if Plastech was responsible for any of the atrocious interiors that have (dis)graced Chryslers over the past 5 or so years, then good riddance”
The OEM is 100% responsible for their end products. Everything has to be reviewed, approved, and validated under APQP and PPAP processes.
From the AIAG manual (which Chrysler is a part of)
“4.6.7 Appearance Approval Report
4.6.7.1 An Appearance Approval Report shall be provided for any parts
with color, grain, or surface appearance requirements.
4.6.7.2 Approvals shall be documented on the AIAG PPAP current edition
Appearance Approval Report form.
4.6.7.3 Suppliers shall coordinate all pre-grain, post-grain, and color
approvals through the Metrology Department.
4.6.7.4 The Metrology Department will coordinate approvals with
the program assigned customer applications Product Quality
Engineer and [OEM] final customer.
Even though chrysler choose to use the horrible interiors… perhaps this is a very clear sign they are fixing the biggest problem with their line (other than the lack of a sub-compact). Weren’t there rummors of a mid year fix? please let this be it!
None of those vehicles were selling anyway. Sounds like Cereberus found a way to stick it to a supplier and clear the decks of some excess inventory all at once.
Looks like beating down their suppliers to within and inch of bankruptcy and super cheapening their interiors to maximize profits are coming back to bite them in the ass. It’s unfortunate that the suppier is the one paying for Detiots bad deads, for now.
When they’re ready to resume, Plastech’s Chapter 11 problems will probably prevent them from ramping up new parts right away and, surprise, parts will immediately begin to roll in from China (almost like they had the drawings a month ago).
KixStart might be on to something. Could this be a calculated move to Chinese suppliers? That way Chrysler could improve their interiors with no cost increase.
“a lack of plastic parts has forced automaker to suspend operations at four U.S. assembly plants: Sterling Heights, Mich. (Sebring and Avenger); Newark, Del. (Durango and Aspen); Toledo, Ohio (Nitro and Liberty); and Belvidere, Ill. (Caliber, Compass, Patriot).”
I guess the real question is, will any potential notice or care if there is a prolonged production gap for any of these vehicles.
Radimus has the gist of this, it’s part of Cerberus’s overall plan (notice that they cancelled the contract FIRST, even before securing a replacement). Cerberus’s remains a venture (vulture) capital firm, first and foremost. Bankruptcy is most assuredly in the cards.
Don’t feel TOO bad for Plastech…. The best suppliers have been rapidly diversifying their customer base. There is quite a lot of non-Big 2.8 production in North America these days, and contrary to popular belief, you don’t have to be part of the keiretsu to get in on the business. All the non-US based manufacturers place lots of business to suppliers with plants and engineering centers in the U.S. (though the HQs may be elsewhere). Given the rapidly dwindling leverage of Big 2.8 purchasing departments, their tactics are getting more and more extreme, and less and less effective. But any supplier with a clue has been busy wooing some new OEMs, and those OEM’s are open to the discussions.
Sterling Heights, Mich. (Sebring and Avenger); Newark, Del. (Durango and Aspen); Toledo, Ohio (Nitro and Liberty); and Belvidere, Ill. (Caliber, Compass, Patriot).
…thereby allowing Chrysler to reduce inventories of a rogues gallery of ‘hasbeen’ and ‘neverwas’ models.
Okay, here is another crazy theory.
The leaders of these supply companies should have been looking for other sources of income for a long time now. That way, they could have been able to force better terms on their customers.
They have obviously not done this. Why were their leaders not more diligent in their duties?
Simple, they were “made”. They did not fear because they have so much personal cash, and carefully constructed employment contracts, that they just did not care. Perhaps they looked at all the hardwork involved in diversifying their companies, and instead decided it was best to just keep their options open, or be ready to retire early. Seems to me that the lack of loyalty to the company has come full circle. Nowadays, NO ONE has any loyalty to a company. Not the guys on top or bottom.
Given the lack of loyalty, I would think that the stockholders and creditors will need too start figuring out a way to make the top dogs more “bought in”, or they will continue to take hits from these sorts of failures.
I worked for a company that made sure that someone at the top was personally liable in the event that a client company went bankrupt or failed to pay our fees. It worked to. Wave of the future?