Chrysler Group LLC, the company built out of the alleged morsels of the old Chrysler has a problem: In order to make new cars it needs to have the old tools. A lot of those tools are at parts makers who are sitting on unpaid bills, old bankrupt Chrysler stuck them with. Payback for unpaid bills being a bitch, the parts makers don’t want to give up the tools.
New Chrysler may need mediation and extra money “to resolve disputes over access to tools, Frank Oswald, a Chrysler lawyer from Togut, Segal & Segal LLP, told U.S. Bankruptcy Judge Arthur Gonzalez in Manhattan,” reports Bloomberg.
“We don’t want to have a situation where, after rushing to get the sale closed in 42 days, Newco is unable to start up production because we don’t have necessary parts,” Oswald said.
There are about 70 unresolved cases. Even one missing part can hold up production for a long time. Oswald said lawsuits may need to be filed “to the extent that there are recalcitrant suppliers.” Good luck with that, that can take a while.
I guess this was an opportune moment to use the word, “oppertune”!
I realize this was clipped from elsewhere and not the author’s error – but geez, pithy sayings should at least be literate.
Glad you caught it :)
I’d be hard pressed not to dispose of said tools if I were a parts maker who had been making parts for Chrysler and gotten screwed in the bankruptcy – at least we aren’t to the point that the government can force a company to sell something to another for “the public good”. Unfortunately, I imagine the tools are property of ChryCo.
Workman’s lien?
Auto companies almost always pay for the tools. The issue is likely to be about bills that were not paid on brand new tools right before the bankruptcy. They walked away from paying those bills, and yet need those tools. As said above, one part, one $0.30 part, can shut down an entire assembly plant for quite some time. Suppliers agree to pay the automakers some ridiculous $18,000 per MINUTE they are responsible for stopping production. WRT to suppliers that are owed money and attempting to hold on to the tools, while it’s a pita to chry, they won’t stand a chance of winning that case. But, it will continue to delay production and keep their legal dept employed.
Things like this and the supplier issues plaguing the industry now make me wonder what ever happened to good old vertical integration. While I am sure there are some benefits of outsourcing, it seems that it would be cheaper overall for an automaker to build everything needed for a car in house, including batteries, alternators, wheels, and the parts needed to build the car itself. Why go to a supplier and pay a markup on a part when you could build or buy your own factory to make it and cut out the middle man?
I am sure there are some economies of scale at work there, but nothing would stop Chrysler Parts and Tools LLC from also making parts and tools for other automakers and selling those at a markup, thereby giving Chrysler’s own vehicles an even better price point in the market.
The suppliers get stuck with the debt for unpaid tools and should have the right to sell them on the open market to recover that loss. Or they should be allowed to charge the new, new Chrysler for them as an alternative.
The tools and stamping dies that belong to the NSFW’d secured bondholders?
Oh. Those tools. The tooling that should be dragged to an auction.
If I was one of the unpaid suppliers with tooling Chrysler needed, I would send Chrysler a photo of a hooded welder standing over the tooling with a plasma cutter along with a ransom note.
“One million dollars in unmarked twenties or the fender die dies.”
Why don’t they just run down to Sears? They always seem to have a nice selection.
Seriously though, here’s where the C11 starts to get messy. They walked away from billions in debt, there will be consequences. The fact that the PTFOA completely overlooked this as the Bankruptcy took shape is laughable. I don’t want to see Chrysler fail, but I don’t want it to be easy for them. All that would do is make the government believe that they can step in on any failing large company, for the “greater good”.
“….the supplier issues plaguing the industry now make me wonder what ever happened to good old vertical integration.”
Pencil pushing departmental financial geniuses arrived and snuffed it out.
commando1 wins the thread comment prize….
Superbadd75 & Commando1: +1 drinks in your honor, sirs. Well played.
Personally, I hope the suppliers can push for a nice a government pay off for the tools. Everyone else gets to suck at the government teat, why shouldn’t the suppliers?
superbadd75 :
June 24th, 2009 at 9:48 am
Why don’t they just run down to Sears? They always seem to have a nice selection.
Seriously though, here’s where the C11 starts to get messy. They walked away from billions in debt, there will be consequences.
Just as there is for private citizens that file for personal bankruptcy and small businesses that fail. Fewer people will want to do business with you. the ones you stiffed before being the least likely to give you a chance.
The fact that the PTFOA completely overlooked this as the Bankruptcy took shape is laughable.
It’s predictable; it’s the government.
I don’t want to see Chrysler fail, but I don’t want it to be easy for them. All that would do is make the government believe that they can step in on any failing large company, for the “greater good”.
This won’t have any effect on the government’s general belief that they can do anything and everything, and do it better.
Look, it’s Chrysler. They can produce without extraneous parts. Send ’em down the line and ship ’em out of here like they always do.
Extra bonus if they ship without steering wheels – no more ugly POS clogging our roads.
This should be spun as part of a weight reduction program or as reducing production costs. Sure the cars aren’t quite complete… that too can be spun as creating jobs for dealer technicians to complete assembly of vehicles using old defective paid warranty parts and junk yard parts. Some spin about saving the environment through advanced recycling program etc.
A lot of suppliers have already and are going to be in bankruptcy themselves. Maybe if a supplier is going to declare Ch11 they should buy the tooling from Chrysler and 15 minutes after cutting the check declare bankruptcy. The asset tooling would be the “new” suppliers asset and the debt would be the old suppliers. Sound fair. Something to do with Karma is going on here. You simply can’t go through life screwing people over without consequences of some sorts.
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@ NulloModo
There are certain instances where suppliers make the same basic product for all customers worldwide with minimal tweaks (add’l bracket, different fastener) that creates huge economies of scale and creates an environment where each automaker isn’t paying engineers to derive their own particular widget.
Lower costs for everyone!
Where the Detroit Bunch fall flat on their faces is by not utilizing these one-time engineered, globally sold parts because they want to have their own nifty little spec or because they don’t plan the correct amount of space to package the part.
So they end up paying a supplier engineer to create a new part from a blank page with their specifications and have a OE engineer preside over the whole event to essentially check the other guy’s work.
The most hilarious/sad result is when two different parts are designed and tooled separately by two separate suppliers, but look so similar due to the ‘specifications’ that the customer thinks they just got a Cobalt steering wheel on their Caddy.
The theory is sound, the error is how it’s been put into practice.
I am sure there are some economies of scale at work there, but nothing would stop Chrysler Parts and Tools LLC from also making parts and tools for other automakers and selling those at a markup, thereby giving Chrysler’s own vehicles an even better price point in the market.
See Delphi and Visteon. That was their business model. Spinning off Ford and GM’s part businesses was supposed to allow them to gain market share by selling to non-captive customers.
The New Chrysler: Some assembly required, batteries not included.