Suppliers writing a new Chapter (11) in Detroit's history

Implications: A bankruptcy court has denied Chrysler the right to pull tooling from  Plastech which filed for Chapter 11 protection after negotiations fell apart.  This new found bargaining chip may prove valuable to other Tier suppliers as they continue to be squeezed between rising material costs and shrinking parts prices.  Will more Tier suppliers look to the courts for relief as they seek to regroup under fire from customers, investors, and creditors?

Analysis: In decades of Detroit's OEM-supplier relations there have rarely been exceptions to one-sided negotiations between the Goliath automakers and their suppliers.  This week Chrysler encountered a new barrier to bullying tactics: Plastech won a protective order from the bankruptcy court barring Chrysler from moving molds to another supplier.  The court noted that even though Chrysler would suffer financial harm Plastech was shielded from such actions by the law.  While granting a stay of execution the court encouraged both parties to continue negotiations toward a mutual resolution.  Coming on the heels of CEO Bob Nardelli's promise to shut Plastech out of future Chrysler business this was a harsh wake up call to OEMs that the courts can and will put smaller suppliers on much firmer bargaining ground.

As bankruptcy courts get more crowded with distressed suppliers the OEMs may have to swallow their pride and negotiate more accommodating contract terms.  The industry has now seen how supply disruptions can bring even the biggest players to their knees and back to the table.  This may be a much-needed epiphany for Detroit as they realize the long term benefits foreign OEMs have gleaned from more constructive supplier relations.