Chrysler Files Suit Against Former Parent Company, Daimler

Chrysler Group LLC, which emerged from restructuring bankruptcy earlier this summer, has filed suit against Daimler AG of failing to honor contracts which require it to supply automotive components to some of Chrysler’s production facilities.

Chrysler’s allegations are outlined in papers filed on August 21 with the U.S. Bankruptcy Court in New York.

Chrysler spokesman Gualberto Ranieri said that the conduct of its former parent company, “threatens to shut down Chrysler Group’s manufacture of key product lines.”

Daimler AG says that it rejects Chrysler’s breach of contract claims. Julia Engelhards, a Daimler spokesperson, said, “We believe these claims are without merit, and we will defend ourselves vigorously.”

Daimler alleges that Chrysler owes it

55 million in compensation for reduced volume of its 2.2-liter diesel engines which it supplied to Chrysler. At current exchange rates, that translates to about $78.7 million. Chrysler uses the 2.2-liter engines in a variety of models, including its PT Cruiser, which it markets in Europe. Daimler alleges that the American automaker did not order as many of the engines as it had agreed to.

Chrysler counters this claim in its legal complaint. In its court filing, Chrysler says, “the volume shortfall payment issue was resolved in an April 17, 2009 pre-petition agreement that settled a number of disputes between Daimler and the old Chrysler.”

The complaint goes on to accuse Daimler of refusing to supply torque converters and steering columns to Chrysler in an attempt to force Chrysler to pay for the volume shortfall.

Ranieri says, “Chrysler Group believes that Daimler’s misconduct is designed to extort a settlement by wrongfully withholding crucial parts that Daimler has contractually committed to supply to Chrysler Group.” He also claims that Daimler’s actions threaten Chrysler’s Jefferson North assembly in Detroit where the automaker produces its Jeep Grand Cherokee model as well as operations at its Brampton, Ontario production facilities which produce the Dodge Charger and Challenger models as well as the Chrysler 300 and 300c models. He claims that Daimler’s refusal to honor its agreements is a direct violation of the April 17 agreement which was subsequently approved by the Bankruptcy Court.

Chrysler entered into Chapter 11 bankruptcy on April 30 of this year and emerged on June 10 under the control of Italian automaker, Fiat SpA.

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