There must be some connection between a company’s name and its fate. Just take for instance the Northwest Tool & Die Co. which could have been a casualty of Michigan’s troubled auto industry if not for Honda Motors.
The story goes this way; it was two years ago when the small tooling shop located just outside of Grand Rapids was getting ready to close down due to the large debt that has accumulated to almost $6.5 million and losing $11 million more money in when its largest customer, the Tower Automotive Inc. had filed its won Chapter 11 case.
Luckily for Northwest Tool it was able to seek out a contract with Honda Motor Co. which eventually saved the tooling shop from closing down and helped it to reach its 39th year. Despite the Northwest Tool’s bankruptcy filing, Honda has continued to give the tooling company work.
This continued business from Honda (the maker of Honda fuel tank cap) has enabled the Northwest Tool to finally double its staff to 83 workers and now is expected to reach $16 million this year. Anthony Chopp CEO of Northwest Tool & Die said that they have the biggest influx of new customers on the time that they were on the verge of bankruptcy. But now with all the things happening to their company, CEO Chopp said that they are still very fortunate.
Northwest Tool has been struggling to compete with other tooling companies overseas and 36 percent of Michigan’s tool and die shops have already closed down since there are not much business to compete on that, according to the Center for Automotive Research.
Jay Baron President of CAR also said that even the global market is not enough to provide all the tooling shops available. They are only enough to fill half of the automotive tooling capacity. He also added, "There's no argument that our industry here makes great tools want great tools at lower costs. They want local quality at foreign prices. There's the rub." It really helps when an automaker invest on a local tooling shop.
A few years back, Honda Motors has already chosen four North American companies that produces dies and molds for auto parts. These shops handle about 16 percent of Honda’s tooling and the automaker is thinking of adding four more to its program by the next two years.
Actually dealing with local tooling companies cost more for Honda as compared to just importing tools from other countries that is according to Tim Meyers, Senior Manager in Honda’ North American purchasing division. Luckily for tool companies like Northwest Tool, Honda has this philosophy of buying parts where it produces vehicles so it doesn’t have to worry about shipping the tools from overseas or shipping them back in case of defects.
Meyers also added, "We're trying to provide them some business stability so they can go ahead and make the investments to improve their competitiveness."
Likewise, the company is also asking its supplier Challenge Manufacturing to employ Northwest Tool in making dies for its shape parts for the Acura RDX and MDX. And just in case Northwest Tool’s didn’t make it they have a backup plan that would supply them with their required dyed parts.
Chrysler LLC is currently in critical condition after the cancellation of the contracts with auto parts supplier Plastech Engineered Products Inc. As such, the threat of plant idling and laid offs are hanging over the automaker’s head.
The cancellation of the contracts with Plastech, a bankrupt supplier, could halt production at all of the Chrysler's assembly plants. Additionally, it could result in layoffs for tens of thousands of workers.
The dispute isn’t as simple as halting the production of A1 Cardone Cardone Select Ignition Distributor. On Friday, Chrysler canceled $200 million in contracts with Plastech and demanded the return of the tooling, which Chrysler says it owns. As trucks were en route to Plastech to get the equipment, the Plastech filed for Chapter 11 bankruptcy protection therefore stopping the transfer.
As a result of the dispute, the Auburn Hills-based automaker idled production at four assembly plants Monday including a Sterling Heights factory that produces midsize sedans. Two Ontario factories are also expected to close late today.
According to the Detroit News, Chrysler has asked a judge to let the automaker remove its tooling, the dies, molds and other equipment used to make car parts, from Plastech's facilities. A hearing regarding the matter is set on the 13th of this month. A status hearing, meanwhile, is set for today.
In court documents, Chrysler said that without the tooling it can't move the work to a substitute supplier and would have to stop all production, which totals about 2.3 million vehicles per year, idling at least 14 factories.
Plastech, to note, manufactures approximately 500 parts for Chrysler that are used in its assembly plants in Canada, Europe, Mexico and the United States.
Plastech General Counsel Kelvin Scott said the supplier still wants to work with Chrysler, but can't now that the contracts are canceled. "We're working with all our other customers that didn't take the drastic action Chrysler took," he said. "They've brought this upon themselves."
The contract dispute is expected to cause threatening consequences. Closing a single assembly plant for a week costs about $100 million, said John Henke, auto analyst and president of Planning Perspectives Inc. He noted the Plastech dispute is a trial by fire for new Chrysler owners and management.
Henke said he's surprised Chrysler would cancel the Plastech contracts without ensuring the tooling would be returned or having an alternate supplier in place. "This mistake is costing them tens of millions of dollars a day," he concluded. "This could be a little payback from Plastech."
Chrysler LLC is asking the court to lift stay order it has issued to preclude it from repossessing equipment held by Plastech Engineered Products Inc., an auto parts supplier.
The supplier repeated financial and quality issues forced the automaker to rescind its acquisition orders with the distressed supplier, and gives the automaker the right to reposes its tooling this week, Chrysler attorneys told U.S. Bankruptcy Judge Phillip Shefferly Wednesday.
The Auburn Hills automaker is asking the bankruptcy court to lift the order so it can turn over the work to another supplier. The work covered by the pact between companies includes both interior and exterior plastic components used in every Chrysler vehicle.
Plastech attorneys, meanwhile, said the automaker does not have the right to take the tooling because its Feb. 1 bankruptcy filing protects it from having to surrender those assets. Attorneys for Plastech and its creditors noted, “Without Chrysler's business Plastech would fail to continue as a business.”
"Other major customers still want to move forward," said Frank Merola, an attorney representing Plastech's second-lien note holders. "Lifting this stay sentences this case to liquidation."
What would be the greater impact of the dispute in the auto industry as a whole? If Plastech stops its operations, it would mean paralyzing General Motors Corp., Ford Motor Co. and Johnson Controls Inc. Why? This is because the supplier provides key components for the automakers major products such as the Ford F-150 pickup and GM's full size crossovers.
GM and Ford said Wednesday they support Chrysler's rights to the tools, though not necessarily their efforts to reclaim them. They operate under similar contracts, but continue to order parts from Plastech, according to Detroit News.
Chrysler canceled its purchase orders on Feb. 1. The automaker famed for the manufacture of durable Jeep doors sought to take the tooling from Plastech's plants. To avoid the situation, Plastech filed for bankruptcy. Due to undelivered Plastech parts, five Chrysler plants endured a one-day shutdown.
Douglas Doran, Chrysler director of interior purchasing, said that consultants BBK Ltd.'s advice that Plastech was financially insolvent was the primary reason Chrysler sought to end its relationship with the company. He added the Auburn Hills automaker on three occasions sent a third-party to work with Plastech on quality issues and cited Plastech on some 450 specific quality issues in 2007 alone.
What’s more, it was revealed that the automaker rejected a pre-bankruptcy plan. The plan, which require Chrysler to spend $100 million over the next four years, will allow Johnson Controls Inc. "This situation was a meltdown for us," Doran admitted.
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