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Part Shortages At Chrysler And GM?

Published March 2, 2008

Original publication date: 3/2/08

In recent news, both GM and Chrysler have recently suspended operations at several manufacturing plants as a result of problems with their part suppliers. 

We'll start with GM.  American Axle Corp. was spun off from GM in 1994.  Its former parent is still its biggest client, representing 80% of its business.  It supplies truck and SUV parts to GM.  Or at least it did until recently.  In order to compete with its rivals, it released plans to cut hourly labor costs from $70 per employee down to between $20 and $30.   Not surprisingly, the United Auto Workers Union went on strike.  

On to Chrysler.  Most recently, it shut down a minivan plant in Windsor, Ontario.  The Canadian Auto Workers Union at TRW Automotive walked off the job on February 28 after failing to reach a contract with their employer.  This problem for Chrysler is in addition to other recent difficulties.  Last month, a company called Plastech filed for Bankruptcy protection.  This caused Chrysler to temporarily shutter five plants, with a potential shut down of all 14 Chrysler facilities as a result of not having access to the over 500 parts sold to it by Plastech. A temporary agreement kept the parts coming, but it's set to expire on March 3.  In the mean time, Chrysler lost a motion before the Bankruptcy Court to compel Plastech to turn over tooling used to make those 500 parts.  So Chrysler had better hope that further deals can be reached to keep those parts coming.

From a New York Lemon Law perspective, this could get interesting.  Imagine you were the CEO of American Axle Corp.  GM represents 80% of your business.  If GM said they were going to pay you 75% of what they used to pay you for the same parts, what can you do?  If you want to stay in business, you're going to give GM what it wants.  After that, you will try to cut expenses enough to stay in business.  The predictable results:  strikes and bankruptcies for suppliers, and plant shutdowns for automobile manufacturers.  And possible lemon law cases as vehicles are unable to be repaired due to a shortage of replacement parts.

Truth be told, GM and Chrysler can use a little down time.  They have enormous inventories built up to weather this storm.  I am sure that this factored in to their decision to squeeze their suppliers.  However, these types of things have a way of getting out of hand. 

In the mean time, if your car is being repaired, and your service advisor has requested that you take the vehicle home until parts arrive, SAY NO.  You WANT your car to sit at the dealership.  You are absolutely helping the manufacturer when you take the vehicle back before it's fixed, as you lose days out of service for repair.  You are well within your rights to ask the dealership to hold the vehicle until it can be fixed.  There is no reason for you to be driving a defective vehicle.

Eugene Krukas, Esq.

2704 Grand Ave

Suite 4

Bellmore, NY 11710

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