Supplier: Chrysler Spent Millions To Save Thousands

Transact Precision says Chrysler Canada spent millions of taxpayer dollars to avoid paying an extra $150,000 to the parts maker.

TORONTO (CP) -- A supplier involved in a dispute with Chrysler Canada says the troubled automaker spent millions of taxpayer dollars to avoid paying an extra $150,000 to the parts maker, an allegation which Chrysler called "outrageous."

Dean Topolinski, president and director of Transcast Precision, said in an interview Monday that his company was trying to cover its transition costs when it asked Chrysler to pay 2.5 times more than it had originally agreed to for five days worth of inventory.

He said this would have cost Chrysler approximately $150,000 extra, but instead the automaker refused and spent an estimated $5 million to $10 million shutting down plants in Windsor and Brampton, Ont., taking the matter to court and moving production of the parts to its Toronto-area facility, where workers are paid more than three times as much as Transcast's employees.

"They spent millions of dollars this past week that were completely wasted and there was absolutely no need for it," Topolinski said.

He said that those "ended up being taxpayer dollars" because Ottawa and the Ontario government provided $250 million last week so Chrysler could meet its payroll and other immediate obligations while it negotiates a larger bailout package from Canadian and American governments.

But Chrysler's side of the story was quite different.

The company said it had no responsibility for Transcast's transition costs and had the taxpayer in mind when it decided not to pay Transcast the extra money it was demanding. Chrysler said when it went to retrieve the tooling equipment -- which it owns -- from Transcast's plant, it had been moved to several different locations.

"We find these statements to be absolutely outrageous. We will continue to defend our rights in the appropriate forum and will not submit to these unbelievable tactics," Chrysler Canada spokeswoman Mary Gauthier said Monday night.

On March 31, Chrysler was forced to shut down its minivan plant in Windsor due to a shortage of die-cast aluminum engine and transmission mounts, and by Thursday production was halted at its car plant in Brampton as well.

Production was expected to resume at both plants on Tuesday.

The parts shortage began for Chrysler after a creditor for financially troubled supplier Vannatter Group seized and sold its assets at the end of March.

Transcast bought up the equipment and inventory at a plant near Windsor and told the company via email that it would raise the price for five days' worth of inventory so it could meet transition costs, Topolinski said.

He added that Transcast also asked Chrysler to pay $900,000 it owed to Vannatter's creditors.

Chrysler has denied that it owed Vannatter any money.

Topolinski said Transcast wanted to negotiate a longer-term contract under which the company would replace Vannatter as a supplier for Chrysler, but Chrysler didn't respond to the email and took the issue directly to the Ontario Superior Court.

There, Justice Alexandra Hoy ruled that the automaker -- as well as Vannatter customers General Motors Canada, Magna International and Gates Corp. -- should be able to buy the inventory for the price negotiated with Vannatter.

"It is clear that if the moving parties permitted themselves to be held hostage in the manner in which Transcast has attempted, complete chaos in an already difficult sector would ensue," Hoy wrote in her decision Friday.

She added that the spat "calls into question the ability of this sector to continue to function outside of court protection." Topolinski said Hoy had reconsidered her decision and had issued a new ruling Monday. But Chrysler said it hadn't heard anything about this.

Chrysler also secured a court order allowing it to move its equipment from the Transcast plant to its casting plant in Toronto so it could begin production of the parts there.

The automaker said Monday it was able to recover most of its tooling -- which had been moved to six different sites -- over the weekend and expects to begin production of the parts at its Toronto plant within two weeks.

GM said its production was not affected by the dispute with Transcast but is also working to remove its tooling and is "actively re-sourcing the parts to another supplier." Topolinski blamed "reckless management" and a "combative" attitude towards suppliers for the shutdown of Chrysler's Canadian assembly facilities.

"I think that part of the DNA and part of the history of the management is one by which they immediately got upset that a supplier was, in their opinion, out of line, they went into the bully tactic, and it ended up turning out to be a very unfortunate situation," Topolinski said.

"I think I'm being used as an example that if you do speak up, then no matter what the cost, we will show you. And in today's economy that system and that management approach is no longer valid."

Topolinski said that if Chrysler does move production of the parts to its Toronto facility, the Transcast plant will no longer be able to operate and between 60 and 100 employees will be out of work. He added that these employees cost between $13 and $19 an hour while Chrysler's employees cost between $50 and $70 an hour.

But Chrysler questioned how Transcast expected to continue producing parts at the plant after it had already moved several of Chrysler's machines from the facility.

Another court hearing is required within two weeks to settle matters regarding ongoing price and supply.

Last week, suppliers said the dispute is one more indication that the parts industry needs immediate government aid.

But Ontario Premier Dalton McGuinty said Monday there will be no separate aid package for the auto parts sector from the province.

He said any direct loans for the parts suppliers will come from Ottawa's Export Development Corp., while the province is willing to help indirectly by putting conditions on its overall aid package to automakers.

"The direct support is to come through the Export Development Corporation, and the indirect support is to come through funding of the sector itself, where the so-called Big Three would have conditions attached to their funds in order to ensure that it flowed to suppliers," McGuinty added.

The federal and Ontario governments have agreed to extend $4 billion in stop-gap funding for GM and Chrysler's Canadian arms, but have offered little to the suppliers.

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