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Stellantis and one of its Canadian auto suppliers are fighting in court over the price of brake rotors in a dispute that threatens to close several U.S. auto assembly plants.
Peterson Spring says in a court filing that it cannot afford to ship parts to the automaker at a price it claims is less than the cost of producing them at its Woodstock, Ont., facility.
Stellantis’ lawyers say the supplier has threatened to stop shipping parts if the automaker doesn’t pay double the contracted price, equivalent to a 77 million US dollars annual increase.
They argue that it is extortion, and that any disruption by their sole supplier of the part would cause “massive and immeasurable” disruption, including the shutdown of two Stellantis assembly plants in Michigan.
Stellantis is asking an Ontario court to appoint an independent company to take over the Woodstock operation and order continued shipment of parts.
Stellantis writes in court documents that it is trying to find alternative options, but replacing the supplier requires new parts to pass safety tests in a process that could take two years.
The Automotive Parts Manufacturers Association of Canada (APMA) says the case demonstrates the fragile nature of the automotive supply chain.
“When [U.S. President] “Donald Trump says, ‘I want everything to be sourced in the US.’ and his administration believes it can happen overnight,” said APMA President Flavio Volpe, “here is a world-leading automaker saying that for a very simple part, a rotor, it would take a minimum of 24 months.”
Founder of parts company faces fraud lawsuit
Court documents reviewed by CBC News detail a complicated sale of the Woodstock operation involving companies owned by a billionaire businessman who is now being sued over fraud allegations.
Patrick James is the founder of First Brands Group, a US-based aftermarket parts company that oversees dozens of popular brands.
He resigned in October as CEO after the company entered bankruptcy proceedings in September.
First Brands Group now accuses him of stealing billions of dollars from the company, which James denies.
The Woodstock facility was purchased by an affiliate of First Brands Group this summer, but the deal fell through.
That’s when Peterson Spring, also owned by James but not a subsidiary of First Brands Group, purchased the facility.
In court documents, Peterson Spring says the transaction included purchase orders from Stellantis for brake rotors, which the company discovered weeks ago were purchased at or below cost.
“I determined that the historical sales prices of products sold to Stellantis are not profitable for a company like Peterson, which does not have a diverse product portfolio,” writes Timothy Soergel, CEO of Peterson Spring.
Soergel says the facility’s previous owner, ZF, was able to subsidize the sale of brake rotors at lower prices thanks to higher profits in other parts of its business.
Concerns about possible closure of 2 plants
According to Soergel, at the end of October both companies began negotiating a new price for the rotors.
Stellantis was asked to pay double the previously agreed upon price negotiated with ZF backdated to July and Peterson Spring told the automaker it would stop shipping parts if they didn’t do so. accept, according to Stellantis lawyers.
“Peterson Spring’s threat to stop shipment of parts will result in the imminent shutdown of operations at two of Stellantis’ assembly plants,” attorney Lisa Corne wrote in an urgent court filing filed Oct. 27.
Those plants are in Sterling Heights and Warren, the Michigan cities where Stellantis makes the Dodge Ram and Jeep Grand Wagoneer.
“A shutdown of production lines at Stellantis plants will substantially and immensely damage Stellantis’ relationship with current and future customers,” Corne wrote, “and its goodwill and reputation in the automotive industry as a whole.”
The next day, October 28, both parties signed a temporary agreement between Peterson Spring and Stellantis to maintain the flow of parts.
Stellantis is paying a lump sum of $7.2 million on top of the historic price of the parts to ensure shipments continue through November 17.
Lawyers for both sides declined to comment on the case, as did a spokesperson for Stellantis.
A representative for Peterson Spring could not be reached.
Volpe, who has been an outspoken critic of the trade war affecting the auto industry, said this case shows how complex and connected the supply chain is.
“We always say that if you cut parts, you will close the industry. “We said it when Donald Trump, at the beginning of the year, said he was going to break everything, including the parts,” Volpe said.
“If the Canadian parts sector had not gotten a tariff waiver from the White House in March, we would have shut down the industry.”
