Bankruptcy of Supplier Could Affect General Motors’ Production of Vehicles

by San Antonio Attorney

A supplier of General Motors filed for bankruptcy, which could directly affect the production at almost all plants of General Motors North American.

Clark-Cutler-McDermott, which is based in Massachusetts, provides interior trim and acoustic insulation products for transportation makers.  However, GM is its biggest client and the supplier is losing about $30,000 daily.  Court papers show that Clark-Cutler-McDermott has lost about $12 million within the past three years in part because the amount that GM pays for those products typically shrinks every year.

According to GM, since they do not have another supplier, the automaker will suffer losses worth millions every day if the delivery of those auto parts is interrupted.

In June, the automaker was granted a restraining order obliging CCM to keep on supplying those auto parts indicated in its purchase orders with the automaker.  However, that court order is only effective until July 1.  On July 7, CCM filed for Chapter 11 bankruptcy.

CCM plans to sell the company, while GM wants to make sure that they get the auto parts they need by taking possession of CCM’s inventory and tools.  A court hearing to decide the subsequent steps will be held on July 13.

The bankruptcy filing of CCM has not yet affected GM’s production, according to the automaker’s spokesperson.

In the court papers filed by CEO James McDermott, he said the automaker urged them to build new manufacturing plant nearer to the assembly plants of GM.  For that reason, CCM decided to open a factory in Lafayette, Georgia.  In return, CCM gained more business from GM.

However, McDermott said that the price offered by GM for many parts are considerably lower than the production cost and market prices.

In another disagreement, CCM would like to pay its employees with the $1.9 million it had upon filing bankruptcy.  GM argues that most of the money came from the automaker as part of its short-term restraining order.

GM is not opposed to paying the workers of CCM, but it is against using the money that came from them to pay the workers if the auto parts will not be produced.

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