Cash-strapped General Motors sues bankrupt parts supplier Cadence

27 Dec 2008

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General Motors Corporation has moved court against a bankrupt auto-parts supplier, for allegedly holding back necessary equipment, which, it said, could hamper the launch of its new car model `Chevrolet Camaro.'

In its petition filed with a US bankruptcy court in Delaware, GM has sought access to facilities and necessary tooling and parts at Cadence Innovation, so that it could start building the new model.

Cadence makes door trim, instrument panels and air bag covers for cars.

The company filed for bankruptcy protection in August, but abandoned plans this month and instead decided to sell itself. It is now under liquidation.

GM, which had cleared inventories in the wake of a slowdown in sales and is left with little stock, said it needed immediate access to the tooling, for a delay could interrupt its vehicle assembly operations.

"Even one day's disruption in supply of certain component parts could cause a shutdown of GM assembly operations, disrupting not only GM's business, but the operations of countless suppliers, dealers, customers, and other stakeholders," GM said in the petition.

GM said Cadence had made an agreement with it to continue manufacture and supply of parts, tooling and equipment and that a shut-down in the absence of an alternative source could cost millions of dollars per plant per day and it needs emergency supplies by 12 January for the launch of the new Chevrolet Camaro.

The GM scrip today gained after reports that its auto finance affiliate GMAC got access to government lending programme.

The Federal Reserve approved GMAC's status as a bank, giving the troubled finance company access to the Treasury-run financial bailout package, which may help GMAC avoid bankruptcy and continue financing of dealer and consumer loans for GM vehicles.

The news of GM suing its parts supplier comes less than a week after the US government agreed to bail out GM and Chrysler LLC with $17.4 billion of emergency loans to provide liquidity and stave off collapse and massive job losses.

According GMAC the status of a bank is expected to further reduce the risk of bankruptcy for GM.

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