Chrysler Assumes Supplier Agreements

After earlier announcing its decision of closing 789 of its dealers, Chrysler also decided what to do with its suppliers. According to a release issued today, the American manufacturer will begin assuming "the overwhelming majority" of supplier contracts to the new Chrysler. In addition, Chrysler may pay suppliers based on pre-bankruptcy accounts receivable.

“This is very good news for suppliers and Chrysler. I know there was great anxiety in the supplier community when we announced Chrysler’s Chapter 11 filing. This should be a great relief. The terms are fair and far better than the treatment trade creditors usually get in a bankruptcy case, and provide a mechanism for quick resolution of all open issues,” Scott Garberding, Chrysler chief procurement officer said.

The list of those who will make it over to the new company was not made public, but it is among documents forwarded to the Court today. The manufacturer will mail letters to some 1,200 suppliers to let them know where they stand.

These letters also provide details of the process by which suppliers can begin receiving payment of amounts that Chrysler has determined will be required to "cure" all contracts to be assumed and assigned.

“Our supplier partners will be critical to the success of the new Chrysler that emerges from Chapter 11,” Garberding added. “We are asking our suppliers to move quickly to become part of the vibrant new company that will emerge from the Chrysler–Fiat alliance.”

A somewhat good day for the suppliers, a "very sad day" for dealers. We already saw the reaction NADA had to Chrysler's announcement. It remains to be seen how the suppliers will react, once they have been notified.