Chrysler fills a lawsuit against former parent Daimler AG

Article by Christian Andrei, on August 29, 2010

Crying extortion, Chrysler Group LLC has filed a lawsuit against former parent Daimler AG for refusing to honor contracts to supply components and thus threatening production at some Chrysler factories.

The lawsuit was filed on August 21 in the U.S. Bankruptcy Court in New York. Chrysler spokesman Gualberto Ranieri said that Daimler's actions are threatening to shut down Chrysler's manufacture of key product lines.

Responding to the lawsuit, Daimler spokeswoman Julia Engelhardt said that the claims are without merit.

The conflict originates from Daimler's claim that Chrysler owes it 55 million euros, or about $78.7 million at current exchange rates, to compensate for not buying as many 2.2-liter diesel engines as Chrysler said it would.

The diesel engine is used for European sales of models such as the PT Cruiser. In its complaint, Chrysler says the volume shortfall payment issue was resolved in an April 17, 2009, pre-petition agreement that settled a number of disputes between Daimler and the old Chrysler.

The complaint says Daimler is refusing to supply steering columns and torque converters in order to pressure Chrysler to make the volume-shortfall payment. Ranieri said that Daimler has moved to "extort a settlement by wrongfully withholding crucial parts" that Daimler has contractually committed to supply to Chrysler Group.

Being threatened are the production lines of the Grand Cherokee at the Jefferson North assembly plant in Detroit, as well as the Dodge Charger and Challenger and Chrysler 300/300C in Brampton, Ontario. Ranieri called Daimler's action a "direct violation" of the April 17 settlement agreement later approved by the Bankruptcy Court. Chrysler filed for Chapter 11 bankruptcy on April 30 and emerged under the control of Italy's Fiat S.p.A. on June 10.

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