Harbinger of Things To Come: Chrysler Supplier Getrag Files Bankruptcy
November 17, 2008
DETROIT -- The U.S. unit of Germany's Getrag Group has filed for bankruptcy, saying a lawsuit filed by Chrysler last month in a dispute over an unfinished transmission plant pushed it over the edge.
It may be the first of many such bankruptcies as a study by the Center for Automotive Research in Ann Arbor, Michigan, predicts a wave of supplier bankruptcies if one or more of Detroit's automakers cease operations.
Getrag Transmission Manufacturing LLC, based in Sterling Heights, Michigan, is seeking protection from creditors in Detroit's U.S. Bankruptcy Court as a result of a battle with Chrysler, Bloomberg News reports.
Based in Ludwigsburg, Germany, Getrag formed the U.S. unit in January 2007 specifically to design and manufacturer dual clutch transmissions for Chrysler at a new plant to be built in Tipton, Ind. Getrag claims in the court papers that the plant is 80 percent complete, and it owes more than $500 million on it.
Chrysler, in the lawsuit filed October 29 in Detroit's federal court, charged Getrag with breach of contract and fraudulent misrepresentation. Chrysler claims Getrag violated its contract by failing to obtain as much as $300 million in debt financing before construction of the jointly developed plant was under way.
Chrysler agreed to reimburse the Getrag unit for costs of as much as $305 million while the unit used "good faith efforts'' to obtain senior debt financing to supply transmissions to Chrysler through 2020. By July, Chrysler had authorized costs and expenses of more than $437 million as part of a commitment to "backstop'' the investment if financing wasn't obtained, according to court filings reported by Bloomberg.
Chrysler informed Getrag Monday it was ending all agreements tied to the project and would seek a court ruling that it wasn't obliged to fulfill its side of the bargain.
Posted by Michelle Krebs at 11:53 AM under Business , Chrysler | Comments (0) | digg this | Seed Newsvine
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