Chrysler and Plastech reach interim deal

By Nick Carey and Ben Klayman

Gregg Galardi, speaking at a hearing in U.S. Bankruptcy Court in Detroit, told the judge a deal has been reached that runs through February 15.

"We have made significant progress in a number of areas," said Galardi, who was flanked by Chrysler attorney Michael Hammer.

"Some are happy, some are not so happy," but all parties had agreed to it, he said.

A hearing has been scheduled for February 13 for arguments on whether Chrysler can seize tooling equipment at Plastech plants that the automaker says it owns. Plastech says ownership of the equipment is in question and that its removal would affect other customers.

What the future holds for Plastech probably depends on its other customers as Chrysler likely will look ultimately to shift that work to a different supplier, Fitch Ratings analyst Mark Oline said.

Plastech's other customers include General Motors Corp , Ford Motor Co and Toyota Motor Corp <7203.T> -- all of which had said they were not affected by the dispute and bankruptcy -- as well as Johnson Controls Inc .

Johnson Controls described Plastech as a vendor to its North American auto interiors business and said the downturn in the North American auto market is likely to impact the financial solvency of certain vendors.

Chrysler, controlled by Cerberus Capital Management, terminated its contracts with Plastech last week due to the supplier's financial struggles. Plastech filed for bankruptcy on Friday to stop Chrysler from taking the disputed tooling equipment from its plants.

Plastech, a privately held, minority-owned company based in Dearborn, Michigan, provides Chrysler with hundreds of parts -- including door panels, floor consoles and engine covers -- that are used in most of Chrysler's almost 2.3 million vehicles assembled annually.

Plastech, founded in 1988, has 35 facilities and 7,700 employees in the United States and Canada. It said its liquidity had been reduced due to the downturn in the domestic auto market and rising commodity costs, according to court documents.

(Reporting by Nick Carey, Ben Klayman and David Bailey; editing by Andre Grenon, Leslie Gevirtz, Gary Hill)