Supplier dispute idles Chrysler's area plant

A dispute between Chrysler LLC and parts supplier Plastech Engineered Products Inc. forced Chrysler Monday to shut down or cancel a shift at five factories, including one in Belvidere, and the automaker said it could idle all 14 of its assembly factories.

Plastech supplies Chrysler with about 500 plastic interior, exterior and powertrain components for nearly all of its vehicles, according to a lawsuit Chrysler filed Friday in U.S. Bankruptcy Court in Detroit.

The automaker is seeking the tools used by Plastech, which are owned by Chrysler, to make the components. Without the tools, Chrysler says it eventually will have to cease production of vehicles systemwide. Chrysler terminated its contracts with the Dearborn-based supplier on Friday, before Plastech filed for Chapter 11 bankruptcy protection.

Plastech's contracts with the automaker were worth about $200 million, Plastech spokesman Kelvin Scott said. Plastech does about $1.3 billion in total business, he said.

"We are continuing to supply parts to our other customers, including Ford and GM," he said.

One industry analyst said the production slowdown may be short because Chrysler should have little trouble finding new companies to replace Plastech.

Faced with stiff competition and a shrinking market, many suppliers are willing to take on work if it means getting contracts, said Craig Fitzgerald, a partner in Plante & Moran's Strategy and Global Services Group.

"Suppliers in the tier one to tier four level are severely challenged," Fitzgerald said Monday. "Production values are declining, there is high debt, weak earnings and cash flow, and difficulty in getting credit."

Monday morning, Chrysler announced plans to temporarily close four assembly plants and shut down one shift at another, affecting about 10,500 workers.

Plants besides Belvidere to be closed are in Sterling Heights, Mich.; Newark, Del.; and Toledo, Ohio, while the second shift at Toledo Supplier Park in Toledo will be dismissed, the company said.

Although Chrysler has an inventory of vehicles, it will not benefit from plant closures, said Aaron Bragman, an auto industry analyst for the consulting company Global Insight. "When a plant is idle, you're not making any money. You've got people standing around, so it's just a cost," he said.