DETROIT -- DaimlerChrysler AG and supplier giant Lear Corp. are attempting to negotiate an out-of-court settlement to a festering parts supply dispute.
A court hearing in Oakland County, Mich., Wednesday was postponed until Feb. 1 as lawyers for the two companies try to settle the dispute that threatened production at 12 DaimlerChrysler plants in four countries.
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.
DaimlerChrysler on Dec. 2 won an injunction in a Michigan state court that forced Lear to continue shipping interior trim parts to plants in the United States, Canada, Mexico and Austria. The two sides now have until Feb. 1 to settle the issues.
"This gives us time to work out an agreement in a nonpublic way," said Michael Palese, a spokesman for DaimlerChrysler's Chrysler group in Auburn Hills, Mich. "We've been in business with Lear for a long time, and there's nothing to suggest we can't reach an agreement."
Lear spokeswoman Andrea Puchalsky said the company agreed to delay the hearing while the parties "explore a commercial settlement."
Traditionally, supplier-manufacturer disputes rarely boil over to the point where they end up in court. But in the past year, more supplier battles with the Big 3 have erupted because automakers are reluctant to give suppliers relief on higher costs for raw materials such as steel and resins used in plastic parts.
Lear told DaimlerChrysler it needed to charge higher prices for headliners and door trim panels made by Tier 2 suppliers Shawmut Mills and Sandusky Vinyl. Without additional reimbursement, Lear would have stopped making financial commitments to the two suppliers.
According to its court filings, DaimlerChrysler said such a move would have resulted in as many as 12 plant shutdowns, thousands of layoffs and losses of about $54 million a day.
The shutdown would have affected production of several models, including the PT Cruiser, the Dodge Dakota pickup, and the Dodge Durango and Jeep Liberty SUVs.
Raw material prices aren't Lear's only problem. The 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 said on Oct. 26 that it posted a $750 million loss in the third quarter on total revenue of $3.99 billion compared with a gain of $91.7 million on revenue of $3.90 billion during the same quarter a year ago.
Lear, of Southfield, Mich., ranks No. 7 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $17.0 billion in 2004.
Robert Sherefkin contributed to this report
You may e-mail Philip Nussel at [email protected]