Tuesday, February 5, 2008

Chrysler Starts Closing Plants, Blames Parts Shortage


A dispute between Chrysler and a plastic-parts supplier has resulted in the supplier seeking bankruptcy court protection and has Chrysler contemplating closing all 14 of its North American assembly plants.

Five were closed by late Monday for want of parts from Plastech Engineered Products. The private company has revenue of $1 billion a year, according to credit-reporting agencies, but has been losing money and getting financial support from automakers and other customers.

Chrysler is looking for other suppliers, but they would need the tooling and dies now in Plastech's possession to make the parts. Chrysler says the tools are its property and has asked federal bankruptcy court "to allow us to remove our tooling. We're hoping for that ruling sooner rather than later," says Michele Tinson, manufacturing spokeswoman for Chrysler.

Chrysler told Plastech early Friday it was canceling its contract for parts. "There were issues, concerns," Tinson says, declining to be more specific. Late Friday, Plastech then sought Chapter 11 bankruptcy protection. On Monday, Chrysler began closing factories.

Chrysler sales were off 3% last year, slightly worse than the overall new vehicle market, and were down 12% in January from a year ago, in a market off 4%.

But Chrysler says the plant closings aren't an under-the-table production cut to balance tumbling sales. "We plan to make up the lost work," Tinson says.

Workers will get 75% to 80% of their pay while the factories are closed, she says. Pay for the main job, assembler, was $28.75 an hour in 2007, she says. Benefits paid by the automaker, however, boost the cost to Chrysler to $75.86 an hour, according to Tinson.

Other customers report no supply problems.

"Their situation has not affected our production," and isn't expected to, says General Motors spokeswoman Deborah Silverman.

"We don't anticipate any disruptions," says Todd Nissen at Ford Motor.

"They're still building parts for us. We're monitoring, but we've experienced no interruption," says Mike Goss, spokesman for Toyota Motor Manufacturing North America. "We've been satisfied."

Plastech makes an array of parts, including bumper covers, trim and windshield-washer components.

It is what the auto industry calls a Tier One supplier. That means its parts go directly to the assembly plant for installation on vehicles.

Automakers say it isn't unusual to provide tooling to a supplier to, theoretically, maintain control over quality and maintenance of the tooling.

Factories closed Monday and what they build:

*Belvidere, Ill.: Jeep Compass, Patriot; Dodge Caliber.

*Newark, Del.: Dodge Durango, Chrysler Aspen large SUVs.

*Sterling Heights, Mich.: Chrysler Sebring, Dodge Avenger.

*Toledo, Ohio, North: Jeep Liberty, Dodge Nitro.

*Toledo Supplier Park: Jeep Wrangler.

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