Supplier default threatens GM plants
A General Motors Co. supplier’s bankruptcy could shut down 19 North American assembly plants, but the company is fighting so it doesn’t, according to the Wall Street Journal.
GM is fighting to get equipment and inventory from family-owned Clark-Cutler- McDermott Co. of Massachusetts, a 115-year-old interiors supplier.
The company filed for Chapter 11 bankruptcy Thursday. It blamed the bankruptcy on an unprofitable contract with GM that has drained it of $30,000 a day since 2013, according to the Journal Tuesday story.
GM has accused the supplier of using the bankruptcy process and its position as a critical parts supplier to protect personal interests rather than honor contracts, the story reads.
“GM will be required to shut down all of its North American plants and suffer immense, immediate economic damages in the tens of millions of dollars,” GM lawyers said. “GM will also suffer immeasurable and irreparable injury to its goodwill and reputation, in addition to the significant disruption of the North American supply chain.”
The impact on the Lordstown GM plant from the supplier’s bankruptcy was unknown late Tuesday.
Glenn Johnson, president of United Auto Workers Local 1112, has reached out to determine the impact and is hoping to know more today.
Johnson represents about 3,000 assembly plant workers at the 50-year-old plant where the next-generation Chevrolet Cruze is in launch mode.
The plant employs about 4,500 people. Area suppliers and sequencing plants also support the Mahoning Valley’s economy.
From 2010 to 2015, the first-generation Cruze, a top-selling compact car, was built at the plant. This year, its successor launched and hit dealerships starting in late March.
The U.S. Bankruptcy Court in Worcester, Mass., will consider GM’s request Wednesday to get the equipment and inventory it needs from CCM. A GM spokesman said the dispute with CCM won’t materially affect production before that hearing, according to the Wall Street Journal.
The Journal reports automakers often have a contractual right to purchase back certain tools or inventory used in production of parts for the cars it builds. Bankruptcy, however, can block a car company’s effort to obtain those assets.
CCM makes 175 parts for GM and has been named General Motors’ “Supplier of the Year” four times in the last seven years. CCM says its relationship with GM soured as it absorbed losses of $12 million since 2013, according to the Journal report.
The Journal reports that on July 6 GM moved to exercise its contractual option to purchase equipment, machinery and inventory from CCM plants.
GM is asking the bankruptcy court for special permission to allow it to proceed with the purchase.