Jeep Could Lose $100 Million Because Of Canadian Supplier

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FCA sues over breach of contract.

Automakers rely on a vast chain of supplier networks in order to keep production running on schedule. Any sort of disruption may not only stem the flow of new vehicles but also cause millions of dollars of lost revenue. The pandemic's effect on suppliers is just one example, though there was no one to blame. That's not always the case. The Detroit News reports Fiat Chrysler Automobiles has sued Canadian engine block supplier Martinrea International Inc. in US federal court because it allegedly "improperly and unilaterally" reallocated one of its engine-block manufacturing machines in Mexico to another customer.

That machine is needed to build the engine blocks for the hot-selling Jeep Wrangler, Ram 1500, and Chrysler Pacifica, among others. The supplier signed a contract with FCA to build 13,021 engine blocks for the Pentastar V6 weekly at its facility in Queretaro, Mexico.

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Now that's been allocated for use elsewhere, Martinrea can only promise FCA 6,247 blocks every week. "The insufficient supply will inevitably require FCA US to shut down production of six top-selling vehicle platforms in at least six of its plants," the lawsuit states. "Each hour Martinrea fails to meet fully FCA US's releases is already resulting in monetary damages to FCA US of thousands of dollars, plus other incidental and consequential damages. And this amount could continue to climb to hundreds of thousands of dollars per hour."

All told, FCA says it can potentially lose over $100 million because of the shortage.

Martinrea, however, blames the automaker for its own problems, claiming FCA began insourcing around a third of casting production from a plant in Indiana. In addition, it says the automaker didn't provide sufficient tooling.

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"Martinrea was disappointed that FCA chose to in-source a significant portion of the casting production but, Martinrea relied on, and reallocated, the open casting production capacity created by FCA's decision," the supplier said. "FCA is now suddenly demanding that Martinrea produce 13,000 parts per week - for a period of time - a weekly volume that FCA has never come close to demanding for many years."

Fortunately, FCA dealerships are not lacking inventory and, so far, there are no known production issues. Fingers crossed it stays that way.

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Source Credits: The Detroit News

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