Plastech files for Chapter 11 bankruptcy

DETROIT -- Financially struggling Plastech Engineered Products Inc. filed for Chapter 11 bankruptcy protection in Detroit on Friday night.

In an e-mail sent to Automotive News, founder and CEO Julie Brown said the longtime plastics parts supplier filed its Chapter 11 petition, but did not provide further details.

Brown’s company is the largest minority-owned supplier in the auto industry. North American plastics parts providers such as Plastech have been bludgeoned by higher raw materials costs and lower customer production volumes. At least two of Brown’s main competitors have also gone into bankruptcy in the last few years.

Earlier today, Plastech received a huge setback when Chrysler LLC terminated its contracts with the supplier.

“We notified Plastech a month ago of this pending action,” Chrysler spokesman Kevin Frazier said. “They were notified of the (contract) termination today.”

Chrysler today also began moving its tooling from Plastech plants to competitors who will soon begin making plastic interior-trim parts for Chrysler vehicles such as the 300 sedan.

The loss of Chrysler business took place as Plastech attempted to win a $200-million bailout package aimed at stabilizing the suburban Detroit supplier.

Terminating contracts and moving tools is a time-consuming and expensive step for an automaker. Such moves are taken when there is concern that a supplier’s financial difficulties will interrupt the flow of parts to automaker assembly lines.

Asked why Chrysler acted, Frazier says the automaker needed “to safeguard the delivery of parts to our assembly pants and ensure that we achieve the highest level of quality for our Chrysler, Jeep and Dodge customers.”

One industry source put Plastech’s revenue loss due to Chrysler’s move at up to $200 million annually. Plastech posted sales last year of $1.4 billion.

Early last year, Brown convinced Chrysler, General Motors, Ford Motor Co. and Johnson Controls Inc. to give her company a $46 million bailout.

That bailout’s benefits were eroded during the past year by declining production volume and rising raw material prices.

Philip Nussel contributed to this story