Chrysler patches things up for now

John Dimsdale Feb 5, 2008
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Chrysler patches things up for now

John Dimsdale Feb 5, 2008
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Kai Ryssdal: Five Chrysler car factories sprang back to life today after the car maker reached a tentative deal with one of its parts suppliers. Chrysler shut the plants down over the weekend after a maker of plastic car parts, Plastech Engineered Products, Inc., filed for bankruptcy.

But the agreement to resume parts shipments to Chrysler is just a temporary turn in the road as John Dimsdale reports from Washington.


John Dimsdale: Last year, Plastech’s customers, including Chrysler, Ford and GM, came up with a $46 million bailout to keep the struggling parts supplier in business. Last Friday, with Plastech still struggling, Chrysler decided it wanted out. Plastech immediately suspended parts shipments to Chrysler and filed for bankruptcy.

Global Insight auto analyst Aaron Bragman said Chrysler’s move was a surprise:

Aaron Bragman: Ending a contract like this is the last resort in terms of any negotiations with suppliers unless you have everything already set up and ready to go with competitors’ suppliers. And in Chrysler’s case, when you’re talking about 500 parts for just about every one of their cars in 14 plants, it doesn’t look like they were prepared to do that at all.

Bragman says all of Plastech’s customers are looking for a more reliable supplier, but he thinks Chrysler acted first because it’s a privately-owned company that wants to avoid future bailouts.

Bragman: Chrysler does have options that a public company would not. They’re able to take on a little bit more pain in terms of these kinds of relationships without having the public investors coming knocking at their door. It’s simply the board that’s really calling the shots on this.

Chrysler’s deal with Plastech runs out February 15th. Chrysler spokeswoman Michele Tinson says the company is looking for alternatives:

Michele Tinson: However, we still have a court hearing that’s in litigation now. That would be occurring on February 13th and that will determine the next steps.

But analysts say it could take weeks, if not months, for Chrysler to find a replacement for Plastech.

In Washington, I’m John Dimsdale for Marketplace.

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