Chrysler takes Daimler to court over parts
The automaker says its former owner has failed to honor supply contracts that could derail the troubled company's recovery.
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DETROIT (Reuters) -- Chrysler Group LLC. has sued Daimler AG, saying the German automaker has failed to honor supply contracts for parts essential for the production of key 2010 Chrysler vehicles.
Chrysler, which emerged from bankruptcy in June under new management led by Fiat SpA, said in the lawsuit filed Friday it would be forced to halt production of several 2010 model year vehicles if it does not get the components.
"Without court intervention, Daimler's actions threaten to shut down Chrysler's manufacture of key product lines and derail this Court's carefully structured plan to foster the manufacturing, assembly and sale of Chrysler vehicles for the 2010 model year and beyond," Chrysler said in the lawsuit.
Daimler, which owned Chrysler before selling it to private equity firm Cerberus Capital Management in 2007, has been supplying diesel engines, steering columns and torque converters under contracts negotiated years ago.
"Daimler believes the claims are without merit and will be contesting them vigorously," Daimler spokeswoman Julia Engelhardt said in a statement.
Engelhardt said it was not a dispute over Chrysler's rights to contracts transferred to the new Chrysler in the bankruptcy, but rather about changes Chrysler sought to existing agreements and its request to enter into completely new agreements.
"Daimler remains willing to solve the remaining issues with Chrysler on new and modified supply agreements amicably," Engelhardt said in the statement.
Chrysler said the steering columns and torque converters were essential to the manufacturing process for several 2010 model year vehicles and could not be obtained elsewhere.
The supply agreements date to Daimler's ownership of Chrysler. Daimler sold Chrysler to private equity firm Cerberus Capital Management in 2007, retaining a nearly 20% stake that was wiped out in the bankruptcy.
"Without a continuing supply of these parts, Chrysler will be forced to cease manufacturing operations altogether for the affected vehicles, shut down plants, idle workers, and cease related orders from other suppliers," Chrysler said.
The group led by Italy's Fiat bought most of Chrysler's assets in June. The remaining assets remained in bankruptcy and are now referred to as Old Carco LLC, which is a co-plaintiff in the lawsuit with Chrysler.
The case is In re: Old Carco LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002. 
