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Chrysler Assembly Network Threatened by Plastech Bankruptcy; Decoma Angling for Supplier’s Business

If an alternate supply agreement is struck, it would mark the second time in recent years that a Magna company has come to Chrysler’s aid.

Decoma International Inc. is among the suppliers vying to help Chrysler LLC stave off a wave of costly production shutdowns related to Plastech Engineered Products Inc.’s bankruptcy, Ward’s learns.

While other auto makers appear insulated from Plastech’s Chapter 11 filing, Chrysler’s entire assembly network is threatened because, sources say, Chrysler tore up its contract with the Michigan-based supplier. As a result, Plastech, which supplies Chrysler with components ranging from floor consoles to plastic engine parts, stopped shipping to Chrysler.

This had immediate impact on five plants – two in Toledo, OH, and one each in Belvidere, IL; Sterling Heights, MI; and Newark, DE – costing Chrysler more than 3,500 units of production, according to an estimate based on Ward’s data.

Chrysler declines comment. A spokesman says its supplier relationships are confidential.

A call to Plastech was not returned.

A Chrysler spokeswoman confirms the auto maker is in litigation to acquire its tooling from Plastech. In the wake of the supplier’s Feb. 1 Chapter 11 filing, OEM tooling is subject to an automatic stay that prevents removal.

However, if the tooling is not removed expeditiously and the flow of components is likewise restored, Chrysler claims its entire 14-plant North American assembly network could be paralyzed.

In addition to negative impact on high-profile, high-volume products such as the Dodge Ram pickup and the auto maker’s minivan lineup, a shutdown would imperil a key launch under way in Toluca, Mexico, which is home to the all-new ’09 Dodge Journey cross/utility vehicle.

Sources tell Ward’s that Decoma, a subsidiary of Magna International Inc., is one of a handful of Chrysler suppliers waiting to pick up the auto maker’s Plastech business, though Magna declines comment.

Decoma makes exterior trim, such as fascias.

If a deal is struck, it would mark the second time in recent years that a Magna company has come to Chrysler’s aid. In 2006, Magna Steyr Fahrzeugtechnik AG & Co KG assumed control of the paint shop component of Chrysler’s supplier park in Toledo.

Erected to support production of the redesigned Jeep Wrangler SUV, the paint shop was abruptly abandoned by Haden Prism, a subsidiary of Haden International Group.

The Plastech drama comes on the heels of remarks by senior Chrysler executives, including Chairman and CEO Robert Nardelli, who said the auto maker will aggressively pursue supply contracts outside North America.

Chrysler, for years, has kept a watch list of its suppliers that appear unstable. In a recent interview, Vice Chairman and President Tom LaSorda confirms this practice continues because the auto maker wants its suppliers to succeed.

However, LaSorda adds, “sometimes public information on financials doesn’t contain what’s going on.”

Other OEMs such as Ford Motor Co., General Motors Corp. and Nissan Motor Co. Ltd., which acquires a larger share of its components from North American suppliers than its other Asia-based rivals, appear unaffected by Plastech’s troubles.

“We are working with Plastech to make sure there is an adequate supply of parts to our facilities,” says a Ford spokesman. “We have not experienced any production losses, but we are continuing to closely monitor the situation.”

– with Byron Pope, Christie Schweinsberg and James M. Amend

[email protected]

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