Price dispute won't hinder supplies to Eberspaecher - for now
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Eberspaecher North America's price dispute with a Tier 2 supplier won't affect its ability to receive parts, at least for now.
A federal judge in Detroit has ordered Nelson Global Products Inc. to continue providing exhaust system parts to Tier 1 Eberspaecher until their contract dispute gets resolved.
In the meantime, Eberspaecher must deposit the price differential -- an estimated $940,000 a year -- into a court escrow account, U.S. District Judge Robert Cleland said.
Eberspaecher supplies exhaust systems for several automakers. General Motors, Mercedes-Benz and BMW vehicles use exhaust systems involved in the lawsuit.
The case was filed March 8 after Nelson threatened to cut off the supply of 15 parts as of April 1 unless Eberspaecher agreed to a price increase. Nelson claimed it was losing money on the prices contained in the purchase orders, which it asserted are not legally enforceable contracts.
Eberspaecher's suit alleges that such a disruption could ultimately stop production of those vehicles using exhaust systems involved in the lawsuit, causing "assembly lines and workers at the OEMs to be idled" and creating "a cascading effect down the supply chain of suppliers and sub-suppliers throughout the automotive industry."
Nelson, in turn, denied any breach of contract and counterclaimed, saying Eberspaecher failed to pay invoices on time.
The judge granted Eberspaecher's request for a preliminary injunction to ensure the continued flow of parts. A cutoff, he said, could produce "irreparable damage" for Eberspaecher, including loss of customer goodwill, manufacturer shutdowns and layoffs, and millions of dollars of liability to the impacted automakers.
"The potentially catastrophic effects of a disruption in the supply chain of automotive parts is well established" in past court decisions, the judge said.
Eberspaecher lawyer Steven Susser of suburban Detroit said the two sides "are talking" but that a trial on a permanent injunction is likely "in the not-too-distant future," possibly September.
Susser said that if Nelson prevails, one of his client's fears is that Nelson will unilaterally increase the price of additional components.
A lawyer for Nelson, James Rolfes of Chicago, said he could not comment on the case.
You can reach Eric Freedman at freedma5@msu.edu.
