Plastech Bankruptcy: Chrysler Teeters on the Brink of Bankruptcy

Robert Farago
by Robert Farago
plastech bankruptcy chrysler teeters on the brink of bankruptcy

Automotive News [AN sub] reports that Chrysler is asking U.S. Bankruptcy Judge Phillip Shefferly to let the automaker take immediate possession of its tooling equipment from former supplier Plastech. If not, the automaker says the ensuing parts disruption will quickly spread from the four plants currently off-line to ALL of Chrysler's American production facilities. Plastech's lawyers opposes the motion, saying its business assets are protected by bankruptcy law. [TTAC previously reported that Chrysler had already taken possession of the tools; AN says Chrysler tried to do so on Friday, immediately after canceling the contract. And failed.] Chrysler's petition to recover the equipment will be heard tomorrow morning in a Detroit bankruptcy court. If the judge rules against Plastech, Chrysler could well file for C11 soon thereafter; it can't afford a three-week shutdown.

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  • Jaje Jaje on Feb 04, 2008

    Let's put up these assumptions (note I have not read the filing - I'm lazy right now): 1. We do not know who owns the title to the tooling equipment that is currently under the CH11 BK ( not Burger King...:( ) protection. 2. We do not know the reason why Plastech specifically filed bankruptcy. Was it called by Plastech's creditors or self intiated? Only few have "super-priority" to assets and money - that is not the title holders of equipment but the Fed Gov't for taxes and the lawyers for their fees. Anyway, the BK court will decide whether they stay extends to the tooling equipment - and it might even though it is owned by Chrysler and the contracts they had in place will help define how it is treated. If it hurts the company's ability to be a going concern after BK is over they may treat it as a co owned asset and hold it. BK also allows company's to remain in business producing with all collection efforts stopped - Chysler can reissue the contract for the parts in order to give them business.

  • Acd Acd on Feb 04, 2008

    As someone who owns a 2006 300C, a 2005 Town and Country and a 2001 Concorde I'm very sad about the state of the 'new' Chrysler. What happened with the company of renegades from the 1990's and the product teams that created the original Grand Cherokee, LH (Concorde and Intrepid) Dodge Ram and Chrysler Minivans? They were the most profitable car comapny before the Germans came blitzkrieging into Auburn Hills and sucked the life out of the company. My biggenst fear was that the Germans would suck the lifeblood out of Chrysler and it is pretty obvious that it happened. The only positive from the relationship seems to be the LX 300 and Charger platform and that is getting up on years now. Is Chrysler going to have the money to upgrade their products or are they going to become the new Studebaker, a car company that can afford to keep building their current products but can't afford the R & D to remain competitive in the long term?

  • Gamper Gamper on Feb 04, 2008

    I am sure TTAC and some of you guys are salivating at the prospect of Chrysler having to file bankruptcy. I do happen to be a lawyer, and must say that there are a lot of well educated people on this site which have provided a good analysis. It is likely that Chrysler owns the tools and equipment in question, but Plastech leases the equipment from Chrysler. So Chrysler is a creditor and an account receivable in this scenerio. I suspect that Plastech operates some leased equipment from Chrysler that is also used to make parts for other OEMs. Chrysler may have had the right to terminate the lease with or without notice and remove the equipment. However, the automatic stay of the bankruptcy court will prevent it from happening now and will give Plastech the option to play with the lease terms in the meantime. It is likely Chrysler will be able to remove any tools, equipment that is only used to make Chrysler parts. Any tools and equipment that were subject to a security interest by Chrysler, but used to supply a number of Plastech's customers will be tied up in the reorginization. One thing everyone seems to be overlooking is that the Bankruptcy Court has equitable powers and under the circumstances, even if Plastech retains posession of the tools/equipment, the court would likely order Plastech to resume production and shipment of parts to Chrysler with the previously negotiated terms until another arrangement can be worked out. The bankruptcy court isnt going to force Chrysler into bankruptcy.

  • Vetteman Vetteman on Feb 05, 2008

    If a major share of vehicle production is interupted Chryslers cash flow is interupted to that same degree. Money enters their coffers as soon as a vehicle gets built and shipped which starts the clock on flooring generally about the time the vehicle hits the dealership lot from the transport carrier. The factory gets their money when the dealer buys the car from them and the dealer gets paid when the retail buyer or end user buys the car. If every plant was shut I don't think Chrysler could survive more than a week or two before seeking protection from the courts.