Chrysler Vs. Plastech Heads for Friday Showdown

Robert Farago
by Robert Farago
chrysler vs plastech heads for friday showdown

The mainstream media may have forgotten that last week's Plastech parts embargo threatened to throw Chrysler into Chapter 11, and that the agreement saving the automaker from that fate expires this Friday. But we haven't. And neither has Crain's Detroit Business. According to the paper, a U.S. bankruptcy judge is set to hear arguments to [ultimately] determine who owns the tooling that makes the parts that Chrysler needs to survive. Chrysler says mine, mine, mine. "The automaker alleges that its right to the tools was gained through two prior bailout agreements. In those agreements Chrysler gave the supplier $6.9 million and sped payment of an additional $10.7 million." Plastech says bankruptcy obviates those claims. To wit: pulling the tooling from Plastech plants would hamstring their ability to secure life-sustaining, long-term financing. The most probable outcome is an extension of the interim agreement, but you never know. Meanwhile, here's a factoid that might explain Plastech's hang-tough strategy: the parts maker, owned by Vietnamese immigrant Julie Brown, is the largest minority owned company in the North American automotive supply chain.

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  • Jazbo123 Jazbo123 on Feb 12, 2008
    "Meanwhile, here's a factoid that might explain Plastech's hang-tough strategy: the parts maker, owned by Vietnamese immigrant Julie Brown, is the largest minority owned company in the North American automotive supply chain." Actually, that probably does more to explain why they were ever used in the first place. For the [s]glory[/s] PR benefits of having more minority suppliers, the OEMs have often put up with years of shit parts that they would never tolerate from a non-minority supplier. Double points for this one; A woman and a minority.
  • Redbarchetta Redbarchetta on Feb 12, 2008
    jazbo123 Exactly why does being a minority and/or a woman automaticly make their parts or performance inferior? They make supplies to the OEMs specs and the price they want to pay, just because Chrysler is a theiving cheap ass doesn't mean it's Plastechs fault and should take blame for all the crap cars they make, especially since they is more then just plastic crap in those cars. What about all those non-minority suppliers that provide crap parts to Detriot, that's not their fault just bad luck, right?
  • NBK-Boston NBK-Boston on Feb 12, 2008

    Redbarchetta: I think jazbo123's assertion was that the OEM's are more willing to put up with worse performance from a minority owned supplier (relative to a non-minority owned supplier), should the supplier choose to be substandard. There was no implication in his comment that being owned by a woman or a minority automatically makes a supplier bad, or even increases the chances that it will be bad. It's just that failing to fire a bad supplier means that bad parts persist in the supply chain, dogging the cars on which they are installed. One can imagine a mechanism, though, where a systematic lack of discipline is noticed and exploited by such firms, incentivizing them to be sub-par -- this is a variation on the "low expectations" argument seen for a long time in education policy debates. I'm in no position to know if that is realistic or happens regularly, or not. If any supplier regularly delivers crap parts (i.e. ones that regularly fail to meet the standards specified), it is a sign of failure on both ends -- the supplier for not living up to the agreed-upon specifications, and the OEM for not disciplining the supplier or choosing more wisely. This is true no matter who owns or runs the supplier firm, and I agree that such ownership details should be ignored when it comes time for an OEM to evaluate a supplier and decide whether to continue the contract or shop elsewhere. Jazbo123 is simply arguing that the car companies don't ignore these things well enough.

  • Landcrusher Landcrusher on Feb 12, 2008

    My personal experience backs up NBK's argument. B2B businesses that can take advantage have, in my experience, been worse on average. OTOH, minority or women owned businesses that deal with the consumer, and have no such advantage tend to be above average (the latter point likely being skewed by the fact that I rarely do enough business with a poor B2C company to learn who is in charge). I suppose from a strictly capitalistic point of view, failing to take advantage of the minority/woman owned status could be seen as bad management.