General Motors Corp. is suing a bankrupt automotive supplier for immediate access to specialized parts and equipment, arguing that a delay would hamper the launch of its new Chevrolet Camaro, disrupt assembly operations and cause millions of dollars in damages it can ill afford.
In a filing with the U.S. Bankruptcy Court in Delaware on Christmas Eve, GM accused Cadence Innovation LLC of Troy, Mich. of “holding hostage” the parts and tooling equipment it needs and breaching the terms of an agreement it signed with the automaker in August.
Cadence, which GM once hailed as its 2006 supplier of the year, filed for Chapter 11 bankruptcy in August, which became a liquidation proceeding earlier this month. The automotive supplier makes door panels, airbag covers, consoles and other parts.
GM said it employs “just-in-time” manufacturing where parts are placed into vehicles within hours of delivery. The automaker has on hand parts that can support assembly operations only for several days to a week.
GM wants immediate access to the parts and equipment so it can have a new supplier in place and making parts by Jan. 12 to avoid a major disruption to its assembly operations.
“Even one day’s disruption in supply of certain component parts could cause a shutdown of GM assembly operations, disrupting not only GM’s business, but the operations of countless suppliers, dealers, customers and other stakeholders,” the lawsuit said.
GM said such a shutdown would cost the company millions of dollars in damages daily at each affected plant. The automaker accused Cadence of refusing to adhere to their August agreement and hampering its efforts to take possession of parts and equipment.
Cadence did not immediately return a call for comment on Friday.
Shares of GM rose 42 cents, or nearly 13 percent, to $3.67 in afternoon trading. Late Wednesday the U.S. Federal Reserve granted bank holding status to its financing arm, GMAC Financial Services, which made GMAC eligible for funds earmarked for the government’s $700 billion bank rescue plan and saved it from possible bankruptcy. The move came just days after the White House threw GM and fellow Detroit automaker Chrysler LLC a $17.4 billion emergency lifeline.
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