DETROIT -- DaimlerChrysler AG last week picked a public fight with a supplier that has its back against a financial wall.
The German automaker on Friday, Dec. 2, obtained an order from a state court in Michigan that forces Lear Corp. to continue shipping interior trim parts until a Dec. 14 hearing.
Without those parts, the automaker warned that it would begin closing 12 plants in four countries, lay off thousands of workers and lose $54 million a day.
The dispute ended up in court after Lear told DaimlerChrysler on Nov. 21 that it could not afford to pay two of its own suppliers unless the automaker agreed to pay higher prices. Lear warned DaimlerChrysler that the end of shipments could come at any time after Wednesday, Nov. 30.
In announcing its suit last week, DaimlerChrysler said an interruption of shipments from Lear would halt production of a broad range of cars and light trucks.
Supplier battles with the Big 3 have erupted during the past year because automakers are reluctant to give suppliers relief on higher costs for raw materials such as steel and resins used in plastic parts.
DaimlerChrysler may have been surprised by Lear's decision to fight because Lear generally is considered a customer-friendly supplier.
Raw-material prices aren't Lear's only problem. The Southfield, Mich., supplier also faces capital demands from 26 product launches in the third quarter, supplier bankruptcies and supply chain interruptions. Its automotive trim division operated in the red for the first six months of this year.
Lear spokeswoman Andrea Puchalsky says Lear did not breach its contract. She says that while raw material prices are an issue, the dispute includes a "multitude of commercial issues." Puchalsky would not elaborate.
Suppliers have long disputed the Big 3's annual price cuts and also have complained about their inability to recover engineering and tooling costs.
"We can understand Lear's apparent decision to go to the mat over commodity cost recoveries," Darren Kimball, a Lehman Brothers analyst, wrote in a report last week.
But even if Lear wins the battle, Kimball said, it could lose the war if DaimlerChrysler banishes the interiors supplier to its no-bid list.
Lear may not be worse off if it loses unprofitable DaimlerChrysler contracts. But investors may be unnerved.
Meanwhile, Lear is planning to spin its interior trim division into a joint venture with billionaire investor Wilbur Ross.
Ross recently announced plans to acquire the European assets of Collins & Aikman.
He also is interested in Collins & Aikman's U.S. business. A combination of that size could give Lear more leverage with customers.