FCA accuses supplier Martinrea of breach of contract

DETROIT — Fiat Chrysler Automobiles is suing supplier Martinrea International Inc. in a U.S. court, accusing the Canadian supplier of breach of contract and leaving FCA with an engine block shortage and monetary damages that could reach more than $100 million (all figures in USD).

FCA said in the lawsuit filed Monday that the engine component supplier had a contractual obligation to supply 2,604 engine blocks per day and 13,021 per week.

The lawsuit claims the supplier "improperly and unilaterally" reallocated one of its 3,500-ton aluminum die casting machines for another customer, leaving FCA 7,000 engine blocks short each 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," FCA attorney Moheeb Murray said.

The lawsuit was first filed Dec. 13 in Oakland County Circuit Court in Michigan but was transfered to U.S. District Court in Detroit on Monday.

Murray said that the plant shutdowns will lead to layoffs and "irreparable harm."

The parts shortage will affect production of the Jeep Wrangler, Jeep Gladiator, Jeep Grand Cherokee, Dodge Durango, Ram pickup and Chrysler Pacifica.

FCA said in a statement: "FCA US is pursuing this matter to ensure Martinrea meets its contractual obligations to our business."

FCA requested a temporary restraining order and asked to be compensated for economic damages, legal fees and all other relief the court deems just.

A Martinrea spokeswoman did not respond to calls and emails from Automotive News seeking comment.

Based on letters in the court file, the dispute appears to date to 2018 but came to a head this month.

A Dec. 11 letter from the supplier to FCA, which was attached to the lawsuit, contends FCA signaled plans to bring some of the engine block work in-house to its operations in Kokomo, Ind.

"FCA recently abruptly changed course, apparently in response to another supplier's situation after which FCA elected to in-source its operations," said the letter to Martin Horneck, FCA's North American purchasing chief. "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."

Martinrea contends FCA's own decisions caused the problem and that it has several options to resolve the issue.

"The damages you allege in your letter would be the result of FCA's own choices, past and future, and Martinrea will not be responsible for them," the letter said.

Horneck took charge of the automaker's North American purchasing operations in March.

FCA has struggled with its supply chain relations for several years. It finished fifth out of the six largest automakers in North America in Plante Moran's 2020 North American Automotive OEM-Supplier Working Relations Index Study. It finished last in 2019.

Martinrea, of Vaughan, Ontario, ranks No. 77 on the Automotive News list of the top 100 global suppliers, with worldwide sales to automakers of $2.6 billion in 2019. The supplier also produces steel and aluminum body, fluid handling parts and assemblies.

The Detroit News first reported on the lawsuit Monday.