Magna May Get Biggest Share of Plastech Business (Update1)
Magna May Get Biggest Share of Plastech Business (Update1)
By Alex Ortolani and Michael Ramsey
Feb. 15 (Bloomberg) — Magna International Inc., Canada;s
largest auto-parts maker, may get the biggest share of $200
million in work that Chrysler LLC wants to take away from a
bankrupt supplier.
The automaker plans to move proprietary molds and dies that
make 121 plastic parts to a Magna unit from Plastech Engineered
Products Inc., according to a Chrysler planning document.
Getting the equipment would allow Magna to boost production
at underused plants. Magna, already Chrysler;s largest supplier,
would probably charge more than Plastech, said James Gillette, an
analyst with CSM Worldwide Inc. in Grand Rapids, Michigan.
“Magna becomes the obvious choice here because they have
had a long-term very good relationship with Chrysler,;; Gillette
said. “It would be hard for me to believe that Magna is doing it
at the same price that Plastech was doing it.;;
Auburn Hills, Michigan-based Chrysler plans to find new
sources for 360 parts made by closely held Plastech, according to
the document, obtained from a Plastech manager who asked not to
be named because the information isn;t public.
Plastech parts were used on almost all of the 2.4 million
Chrysler vehicles sold last year.
Kevin Frazier, a Chrysler spokesman, declined to comment on
the document. Tracy Fuerst, a spokeswoman for Aurora, Ontario-
based Magna, also declined to comment.
Seeking Stability
Gillette said the shift to Magna reflects the willingness of
Chrysler and other automakers to shift contracts to large
suppliers that have ample cash and financial stability even at
higher prices. Magna hasn;t had an annual loss since 1990. It had
$24.2 billion in sales in 2006.
Chief Executive Officer Robert Nardelli said Feb. 7 that
Chrysler;s equipment would go to “financially sound;; suppliers
following Plastech;s Feb. 1 bankruptcy filing.
The filing came after Chrysler asked for the return of its
equipment and rebuffed Plastech;s third request in a year for a
financial bailout from automakers. The Dearborn, Michigan-based
partsmaker had asked for increases from its contract prices
because of rising materials costs.
Plastech, based in Dearborn, Michigan, also makes components
for General Motors Corp., Ford Motor Co. and auto-parts supplier
Johnson Controls Inc.
When Chrysler canceled its contracts, that forced a
temporary shutdown of four of the automaker;s plants before an
interim supply accord was reached Feb. 5. The automaker and
Plastech today agreed to extend that accord, which had been set
to end tonight, through Feb. 27.
Both sides are waiting for a Feb. 19 decision by U.S.
Bankruptcy Judge Phillip Shefferly on whether Chrysler can take
the tooling.
Mayco International LLC, a Sterling Heights, Michigan-based
supplier, would get 86 parts orders from Plastech, the second-
biggest amount, according to the Chrysler document. Mayco, owned
by NJT Enterprises LLC, is seeking financing to exit bankruptcy,
according to court documents.
To contact the reporters on this story:
Alex Ortolani in Southfield, Michigan, at
aortolani1bloomberg.net;
Michael Ramsey in Southfield, Michigan, at
