GM Handed 'Supplier of the Year' Award to Key Parts Maker After It Defaulted and Asked for Cash

GM is facing off with a key parts supplier in bankruptcy court today, but the drama between it and the Clark-Cutler-McDermott Company started at the same time the automaker handed the company a nice award.

The Massachusetts-based CCM axed its workforce on July 8 and declared chapter 11 bankruptcy, leaving the automaker without the insulation and trim parts needed to build most of its vehicles. A continued disruption in the supply chain would be a massive blow to the automaker, forcing it to shut down assembly plants throughout North America.

Court documents show that at the same time GM was handing CCM a “Supplier of the Year” award at Detroit’s Cobo Center on March 10, CCM had already told GM it had defaulted on a loan and was looking for a handout in order to stay afloat.

Not only did CCM accept millions of dollars in loans from GM to keep the supply chain flowing, the supplier now wants to sell off GM-owned tooling using funds the automaker supplied to keep the parts in production. GM’s court date relates to an objection motion it filed in a Massachusetts bankruptcy court on July 8 to halt the sale.

The case is a nasty one, with brinksmanship and bitter back-and-forth everywhere you look.

According to documents filed by the automaker (and published by NBC affiliate WFMJ), GM was funding 100 percent of CCM’s operating costs at the time it declared bankruptcy, after months of secured loans that began flowing on March 14. The first month alone saw $1.85 million in loans sent to CCM in three installments.

April saw an Interim Accommodation Agreement forged between the two companies and Wells Fargo, CCM’s creditor, but a final agreement couldn’t be reached. GM blames CCM’s “outrageous demands,” which included the automaker paying off CCM’s creditor in full (to the tune of roughly $1.5 million) as well as its pension withdrawal liability. If those demands weren’t met, CCM threatened to shut down, which it tried to do on June 17. (GM was granted a temporary restraining order to keep the parts coming, though that order expired Monday.)

Between April 25 and June 10, GM claims it provided the supplier with further loans totaling $1.5 million. The restraining order meant CCM could only use those funds for the production of parts for GM. Between June 17 and July 11, GM loaned another $3.45 million to the supplier, and paid $1.82 million through a funding agreement that increased the price paid for parts.

As the end of the restraining order period neared, things got nastier. GM claims it was willing to fund a wind-down of CCM’s operations, but suddenly CCM filed for bankruptcy “less than 24 hours after receiving notice from GM of GM’s intention to remove all GM-owned tooling from the Debtor’s facility.” GM had planned to use an option to purchase the remaining equipment and inventory of parts.

Through the bankruptcy process, CCM seeks a turn-key sale of assets from its Franklin, Massachusetts plant using roughly $1.93 million in funds provided by the automaker for production of parts. With no other supplier to provide those critical parts, GM needs those assets to continue production of its vehicles.

GM claims the supplier’s bankruptcy is due to the “self-interested and wrongful conduct” of its owners, while CCM claims it is “breaking the chains of bondage that forced the Debtors to continue producing auto parts for GM at a substantial loss.”

The court hearing commences this afternoon.