A second plastic maker files for Chapter 11

There are growing signs of trouble in the US automotive plastic parts industry now that two key suppliers have gone into Chapter 11 bankruptcy protection in last two weeks.

Just over a week ago, a supply disruption at Plastech, in both Chapter 11 and dispute with Chrysler, caused about a day’s loss of production at four of the automaker’s US assembly plants. That was followed, last night, by news that Blue Water Plastics had filed for Chapter 11 reorganisation, marking the second time in less than two weeks that a large automotive plastics parts maker has entered Chapter 11

A Chrysler executive reportedly testified in the court about the depth of the financial and operational troubles that have plagued Plastech for at least a year. Plastech, which filed for Chapter 11 protection on 1 February, is trying to protect the tooling that Chrysler wants and, last week, with Chrysler trying to sever its business, stopped supplying parts to the automaker, causing the shutdown, Automotive News said. Plastech reportedly contends that if Chrysler removes its tooling, Ford, GM and Johnson Controls will follow, rendering the supplier unable to do business.

Lord, Blue Water Plastics CEO, reportedly cited high development costs for future customer production (for which Blue Water won’t get paid till the customers start production) and doubled raw material costs among the reasons for going into Chapter 11. He told : “If you look at the industry, a huge portion of the industry is in distress, and there are elements that are very dysfunctional right now.”