Conflict between TRW and GM may end $700mil brake parts contract

Article by Anita Panait, on November 1, 2013

An ongoing row between and General Motors Co. and TRW Automotive Inc. may result to the termination of a $700-million brake component contract in Saginaw, Michigan, sources told Crain's Detroit Business, an affiliate of Automotive News. In September, TRW said in a filing with the U.S. Securities and Exchange Commission that it ended a brake component contract -- representing $700 million in revenue and 6.5 percent margins in 2012 -- with an undisclosed customer.

Although TRW declined to discuss the contract or identify the location of site involved, sources privy with the contract told Crain's Detroit Business that the supply deal is between TRW and GM. They added that the deal involves brake assemblies supplied from TRW's East Genesee Road site in Saginaw. Crain's TRW chief executive John Plant told investors in a conference call that pricing may have been issue in the terminated contract.

Plant said that TRW's customers have a view about the price point they feel they want to pay for certain components. He said that such pricing sometimes coincides and sometimes does not with TRW's price point. Plant quipped that they have to assess where their competitive situation is or where their position assets are at.

He then said that in the case of the terminated contract, TRW's production base compared to the customer's price mix expectations could differ to some degree. It is still uncertain if GM has already found suppliers for the brake components.

The contract termination led to a 90-day consultation period, but Plant quipped that the deal likely would end in January 2014, adding that TRW could partially source the components for an undisclosed period of time. He remarked that while talks are ongoing, it seems that TRW will not retain the business, referring to the contract.

Topics: trw, gm

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