GM Faces 'Catastrophic' Assembly Disruption After Parts Supplier Goes Bankrupt

A Massachusetts-based parts supplier you’ve probably never heard of could force General Motors’ entire North American operation to grind to a halt.

Clark-Cutler-McDermott Co. stopped making acoustic insulation and trim pieces for GM vehicles on Friday after declaring Chapter 11 bankruptcy, a situation it blames on money-losing contracts signed with the automaker, a source told The Detroit News.

The supplier’s parts are found in almost every U.S. vehicle GM builds. With its workforce now laid off, and the supply chain disrupted, GM faces a grim situation — a shutdown of its assembly operations and millions of dollars in losses per day.

GM went to a U.S. District judge last month to impose a temporary restraining order on Clark-Cutler-McDermott, but that order expired at the beginning of the week. The supplier previously shut down on June 17, but the legal intervention briefly kept the supply of parts flowing.

In a court filing obtained by The Detroit News, GM spells out how serious the situation is:

A continued disruption in the supply of component parts will also cause a catastrophic disruption in the supply chain and the operations of countless GM suppliers, dealers, customers, and other stakeholders, including the potential layoff of tens of thousands of workers in the event GM’s North American operations are completely shut down.

The automaker is over a barrel — GM doesn’t have a backlog of parts to work with, as its contract with Clark-Cutler-McDermott was of the just-in-time delivery variety. No other supplier makes the parts Clark-Cutler-McDermott provides GM.

The supplier, which deals mostly with GM, claims its contracts caused it to lose $12 million over the past three years. In the court filing, GM claims it loaned the supplier millions of dollars to continue production.

A U.S. Bankruptcy Court hearing scheduled for today will map out where both companies go from here. Any number of scenarios could come from the ruling, including the supplier being forced to honor its contract with the automaker. So far, there haven’t been any assembly disruptions related to the issue.