GM Reaches Deal With Bankrupt Parts Supplier, But Parts Supply Still Shaky

Steph Willems
by Steph Willems
gm reaches deal with bankrupt parts supplier but parts supply still shaky

General Motors executives are breathing a sigh of relief after the automaker reached a deal with a supplier that threatened to shut down GM’s entire U.S. assembly operation.

The automaker hammered out an agreement with the bankrupt Clark-Cutler-McDermott Company, a supplier of trim and acoustic insulation that GM had been propping up financially since March, the Wall Street Journal reports.

Under the deal, GM will be able to retain the tooling it provided CCM to manufacture 175 parts for the automaker, and purchase any finished product in its inventory. The bankruptcy court judge who approved the agreement ruled that CCM’s contract with GM is now terminated, allowing the Massachusetts-based company to sell off remaining assets, including its dedicated machinery.

According to the WSJ, GM looks ready to oppose the sell-off of that machinery.

The 115-year-old CCM filed for Chapter 11 bankruptcy protection last week and laid off its workforce, a move that would have crippled the automaker’s North American assembly operations. Any break in the supply chain would amount to huge financial losses for GM.

GM immediately filed an objection in bankruptcy court to stop the pending sell-off of tooling and machinery. In the filing, the automaker revealed it had funded the company’s operations since mid-March, when CCM defaulted on a $1.5 million loan. CCM’s attempt to shut down its operations on June 17 led the automaker to seek a temporary restraining order, which kept the parts flowing.

Now that GM has access to its own tooling, the question is: who will produce these parts, using their own machinery, to keep vehicle assembly lines from going silent? The automaker’s use of in-time production methods means it doesn’t have a warehouse full of parts to source from, and timing is critical.

The automaker claims other companies can take over production of the parts. A GM spokesperson quoted in Fortune said the company had identified several unnamed suppliers who could do it, adding that the agreement with CCM “mitigated” any supply chain disruption.

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