Plastech Bankruptcy Filing Idles Chrysler Plants, Possibly More Soon
By Chris Haak
Automotive supplier Plastech Engineered Products, Inc. filed for Chapter 11 bankruptcy protection last Friday after Chrysler announced that it had terminated a $200 million contract to produce about 500 different types of trim, such as door panels, consoles, and engine covers for Chrysler, Dodge, and Jeep vehicles. The $200 million represented a large portion of the parts maker’s annual sales of about $1.4 billion. Even before the Chrysler action, Plastech was struggling and had been seeking a bailout package from its automaker customers.
After notifying Plastech of the contract termination, Chrysler attempted to remove its tooling from Plastech’s facilities so that a competitor could begin production of the parts. It appears that the tooling belongs to Chrysler, and Chrysler claimed that the reason it took those steps was “to safeguard the delivery of parts to our assembly pants and ensure that we achieve the highest level of quality for our Chrysler, Jeep and Dodge customers.” The problem for Chrysler is that Plastech did not allow it to have the tooling, causing a legal battle. Meanwhile, Chrysler isn’t getting the parts in question from Plastech, nor is it able to get them from another source for the time being. The result is that Chrysler idled four assembly plants and canceled a shift at a fifth plant. The company also said in a court filing today that all 14 assembly plants may have to shut down if Chrysler can’t get its tooling back from Plastech. The affected plants and products are:
- Belvidere, Ill. (builds the Dodge Caliber and Jeep Compass and Patriot)
- Newark, Del. (builds the Chrysler Aspen and Dodge Durango)
- Sterling Heights, Mich. (builds the Chrysler Sebring and Dodge Avenger)
- Toledo, Ohio North (builds the Dodge Nitro and Jeep Liberty)
- Toledo, Ohio Supplier Park will cut the second shift today(builds the Jeep Wrangler)
Maybe Chrysler knows what it’s doing with this – but the company is under a brand new purchasing chief who has not worked in the automobile industry before. Perhaps they were anticipating a response like this from Plastech, but it’s most telling that none of Plastech’s other major customers – GM, Ford, and tier 1 supplier Johnson Controls are reporting any parts shortages from the company. It’s also telling that Chrysler spokesman Kevin Frazier would not comment on why Plastech stopped shipping parts to the company.
The vehicles above whose production is immediately affected by the bankruptcy, though not the strongest sellers in the world, actually are in relatively short supply in terms of days’ supply (calculated by dividing the number of units in inventory by average daily sales). That fact hints that perhaps Chrysler didn’t intentionally shoot itself in the foot production-wise and that its actions with Plastech were not intentional. However, if Chrysler’s intent was to ensure a steady, reliable supply of parts, its actions last week certainly seemed to work counter to that objective.
FYI, inventory figures as of January 1, 2008 for the immediately affected vehicles were:
- Durango: 83 days
- Aspen: 46 days
- Sebring: 53 days
- Avenger: 44 days
- Patriot: 84 days
- Compass: 71 days
- Nitro: 64 days
- Liberty: 57 days
- Caliber: 55 days
Note that the industry average on this date was a 61-day supply, and a 60-day supply is considered ideal.
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