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The free press is running a very interesting article on how close Chrysler came to forcing a shutdown of LX platform vehicles due to a supply issue created by one of its' part suppliers. Article below:

Production of Detroit's hottest car in years, the Chrysler 300 sedan, came perilously close to a complete shutdown this spring as a crucial and desperate supplier threatened to pull the plug unless Chrysler paid more for parts.

Such a warning is the auto industry equivalent of a nuclear weapon -- rarely threatened and almost never used.

But in the days and weeks before struggling auto parts maker Collins & Aikman Corp. ousted its chief executive, David Stockman, on May 12, the former Michigan congressman warned his largest customer, the Chrysler Group, he was going to stop sending instrument panels to the Brampton, Ontario, assembly plant. That plant makes one of the most popular cars in the country -- the Chrysler 300.

A shutdown would have been devastating to Chrysler, because the much-hyped Chrysler 300 and other cars from that plant have been the backbone of Chrysler's recent market-share gains and are those rare vehicles that sell largely without incentives. However, Troy-based Collins & Aikman was running out of cash and was burdened by a series of unprofitable contracts, the biggest of which was probably this one, said two senior auto officials.

"A shutdown was within days," said one top auto official, who asked not to be named because of lawsuits surrounding C&A.

Three automotive officials familiar with the tense negotiations spoke to the Free Press for this report but asked not to be named for various reasons.

Stockman, fighting a losing effort to stave off bankruptcy, made the threat because C&A was losing an estimated $50 million a year on the contract to make plastics and fabric parts on the Chrysler 300/ Dodge Magnum/ Dodge Charger platform. C&A filed for bankruptcy protection May 17 and is now being propped up by hundreds of millions of dollars from the automakers.

Two senior auto officials estimated C&A was providing about $700 in parts for each one of those Chrysler vehicles -- and losing up to $150 on each one. Chrysler is on pace to build about 260,000 of the Chrysler 300, Dodge Magnum and Dodge Charger models this year.

Stockman was pressing for small price increases from Chrysler, with the hope he could leverage a deal to get similar concessions from General Motors Corp. and Ford Motor Co., C&A's second- and third-largest customers, and keep C&A out of bankruptcy. Detroit's automakers are reluctant to give price increases to their suppliers for a part that is in production and are even more resistant to let it become public.

The showdown between C&A and Chrysler is a glimpse into the increasingly adversarial relations between Detroit's automakers, who are fighting a product onslaught from Asian automakers, and the parts suppliers, who've been squeezed between rising steel and plastics prices and automaker demands for lower prices.

Now that C&A is in bankruptcy, it is costing the automakers dearly -- maybe even more than the original concessions would have. When Chrysler reports its second-quarter earnings on Thursday, the Free Press has learned the automaker will tell Wall Street it had to take a special provision for extra costs associated with propping up C&A. There could also be a cost associated with the third quarter, said two auto officials.

Automakers have ponied up about $335 million to keep C&A going, money that will last only through the end of September, a deal that includes 15% price increases on their C&A contracts.

Automakers and suppliers have butted heads for years over everything from prices to who pays the bill in a product recall, but rarely do relations get so bad that a shutdown is threatened. Longtime auto observers said they could not recall a time when a supplier intentionally shut down an automaker, but with bankruptcy staring C&A in the face, they said perhaps Stockman felt he had no other choice.

"Suppliers have that power to shut down automakers, they've got that nuclear button at their fingertips, but they never push it because they are afraid how automakers will react," said Jim Gillette of CSM Worldwide who has worked in the industry since 1988.

"There is lip service out there that automakers and suppliers are getting along now, but that doesn't fly. I think it is more tense than ever with the global pressure and low-price parts from China forcing everyone, even Toyota, to be more cost-conscious. If you want to blame it on someone, I guess blame it on the consumer who wants more and more for a lower price," he said.

Chrysler spokesman Mike Aberlich declined to comment.

C&A's restructuring officer John Boken, who came in after Stockman departed, said he did not know the details of Stockman's negotiations with Chrysler, except that the ousted CEO was trying to get price increases from various automakers.

Didn't understand pricing

The tension between Chrysler and C&A goes back to when Stockman took over in August of 2003 as chief executive for C&A, a $4-billion supplier that he had helped put together through a series of acquisitions. He had been chairman of C&A and helped run a private equity fund called Heartland Partners that was buying up other suppliers to merge them into C&A.

His biggest buy was the plastic-trim business from Textron Automotive for $1.2 billion in August of 2001. The contract to make parts for Chrysler on the 300, Magnum and Charger was included in the purchase.

A senior auto official familiar with C&A said Heartland's people "weren't experienced enough to understand pricing on instrument panels. They didn't see that Textron had lowered the price a lot to make sure they got the business, so it was underwater from the beginning."

After Stockman took over, he immediately began to butt heads with Chrysler over pricing. Chrysler took some contracts from C&A and gave them to rivals;meanwhile Stockman walked away from a contract to make parts on the Dodge Stratus and Chrysler Sebring.

The two sides fought over pricing well into 2004, with Chrysler shopping around much of the $1.2 billion it did in annual business with C&A. In the spring of 2004, Chrysler threatened to yank the 300-Magnum-Charger contract from C&A and give it to Intier, a rival plastics supplier.

C&A, which had already spent about $50 million gearing up for the contract, agreed to give price concessions to Chrysler to keep the business, figuring it was better to lose some money on the contracts than to not have the contract at all. That was a no-win situation C&A apparently found itself in often through 2004 and 2005, said senior auto officials.

A May 24, 2004, agreement between Chrysler and C&A, a copy of which was read to the Free Press, shows C&A agreed to give back 8.5% to Chrysler on the 300 contract -- even though it was already unprofitable.

"There was no choice. The contract was going to get moved otherwise," said an auto official who asked not to be named because the person is still in the industry.

C&A also gave double-digit percentage breaks on parts it made for the Chrysler Town & Country minivan, Dodge Ram and Dodge Durango, according to the agreement. In bankruptcy court, it has been estimated C&A has at least 35 unprofitable contracts, some of which were unprofitable from the beginning, others of which became unprofitable as plastic prices rose or because C&A gave more concessions to keep the contracts.

The Chrysler 300 contract was underwater for all of those reasons.

As the cost for plastics went up with rising oil prices through late 2004 and early 2005, C&A went back to Chrysler around March of this year and demanded some price relief on the contract. C&A's target was to get 5-10% increases, or about $35-$65 relief per car.

The two companies haggled through from March until Stockman's departure in mid-May. While C&A officials pushed, Chrysler resisted.

Officials familiar with C&A's perspective said a deal for a price increase was close and would have been followed by deals from GM and Ford. An official familiar with Chrysler said no deal was imminent, so a shutdown was probably more likely.

Either way, something unusual in the auto industry was about to happen -- but didn't.

Instead the outcome is something that is becoming more common: A supplier goes into bankruptcy and gets the same or better price concessions it sought before.

Contact JEFFREY McCRACKEN at 313-222-8763 or [email protected].

Original article posted here: http://www.freep.com/money/autonews/ckc27e_20050727.htm
 

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C & A

Yes the C & A debacle hit hard here in Windsor, Many shops may fold if they do not get paid . I am lucky I do not do anything for C & A , but some of my customers are NOT so lucky.. :nutkick:
 

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Awd Production

Is there any particular reason that they halted production on AWD300C's until september????

I know of a few people who have 06 AWD300C's... And it does not make sense to me that I ordered mine in February and now and only now could they tell me that I wasn't going to get my car until October (if i'm lucky)

So... anybody know why they halted production on the AWD???

Is it because it is summer and they don't think they are going to sell any????


I am flabbergastedly pissed... (but still patient)... for the arrival of my very own 06' AWD 300C...

If anybody knows anything I would be glad to hear what is going on..

Thanx.
 

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Took me six months to get my RWD 300C

Not sure but I now it took six months (Thanskgiving to Memorial Day) to get my 300C RWD hemi
 

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they were halted when i was first buying my hemi last year... this was due to the fact that some were released and sold in cali, and the awd would either not kick in or kick in and not kick out, causing owners to complain and the problem could not be fixed right away. it seems to have been fixed, but still wasn't fully ready until the 06 came out, and it is still very limited. go for the dealer searches... factory direct takes forever... i wanted an awd, but couldn't wait... last winter wasn't bad... traction control kicked right in when needed...
 
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