To an untutored outsider, it looked like an old-fashioned mugging.
Worried about a wave of supplier bankruptcies, Lear Corp. CEO Bob Rossiter asked the Chrysler group last fall to help cover the rising cost of raw materials. Chrysler responded by obtaining a court order to make sure Lear would continue to ship parts.
Then the final slapdown: Last month, Chrysler awarded the contract for the next-generation Ram pickup interior to Johnson Controls Inc. and Visteon Corp. That contract likely will be worth about $400 million a year, and it's a job that Lear -- which supplies the current Ram -- had been counting on.
Coincidence? I told Rossiter over lunch last week that it looked as if a schoolyard bully had knocked him down, stolen his lunch money and kicked his books into the street. But Rossiter demurred. Chrysler insists there is no connection, and Rossiter says he's willing to accept that. Just to be on the safe side, he will meet with Chrysler CEO Tom LaSorda on Tuesday, Jan. 31, to patch things up.
"We want to put this behind us," Rossiter told me at an eatery near his headquarters in Southfield, Mich. "We're still talking to them about it."
It hasn't been a good month for Lear. Last week, the company announced that it had lost $596.6 million in the last three months of 2005. And Rossiter is still trying to prop up Lear's network of suppliers.
Over the past year or so, 40 Lear suppliers have gone bankrupt. Nineteen of those suppliers invoked force majeure -- using the bankruptcy court to back up their claims -- to demand price increases from Lear to cover soaring raw material costs.
And that's what triggered Lear's dust-up with Chrysler. Rossiter had hoped to work out some sort of cost-sharing arrangement similar to the deals he negotiated with Japanese automakers.
"With the Asians, nobody is sitting at the door with a bucket of money to help you," he said. "But they try to work with you."
Despite the trouble with Chrysler, Rossiter said, Lear is poised for a turnaround. He still hopes to spin off the company's unprofitable interior trim operation into a joint venture with Wall Street financier Wilbur Ross.
Rossiter said Lear will expand in Asia and focus on profitable "core" products such as electronics, seats and cockpit modules. Bottom line: Lear will make money in 2006. But Rossiter admitted he's going through a rough patch.
"I won't lie to you -- there were a number of nights when I didn't sleep," he said. "This affects a hell of a lot of people at Lear. It's a tough situation."
You may e-mail David Sedgwick at [email protected]