Production losses at Chrysler after spat with vendor Plastech

Our Corporate Bureau
05 February 2008

Detroit: American automaker Chrysler had to shut down production and/or cancel shifts at five of its plants following a squabble with parts supplier Plastech, who has been in trouble for around two plus years. The disagreement can potentially idle production schedules at all 14 of the automaker's facilities.

Founded in 1988, Plastech Engineered Products Inc. has 35 facilities and 7,700 employees in the United States and Canada. It supplies around 500 plastic parts for almost all Chrysler automobiles.

The company filed for Chapter 11 bankruptcy protection after Chrysler unceremoniously said it was seeking ''other sources'' for the parts. Chrysler reportedly sent a one-paragraph letter to Plastech, summarily ending its business with the company.

Following choking off of business ties with Dearborn-based Plastech, the first impact was a disruption of the flow of parts to Chrysler's facilities, forcing it to shut down four factories, and cut a shift at a fifth.

Chrysler's plants that are already closed are located in Rockford, Illinois; Newark, Delaware; Sterling Heights, Michigan, and Toledo, Ohio. Its Toledo supplier park had to send home the second shift.

Industry analysts predict that the production slowdown may not last long as Chrysler would ideally have no dearth of new companies to replace Plastech. According to Plastech, the source of its financial troubles is a shrunken liquidity on account of the downturn in the domestic auto market, and rising input costs, including the rising price of oil, which is a key input in its parts.