GM sues Goodyear over supply dispute

Warren, Michigan - General Motors Corp. is suing Goodyear, accusing the tyre maker of halting shipments of original equipment tyres-which GM said breached the companies' contract-because of a pricing dispute, according to a complaint filed by GM.

GM said in its lawsuit the supply interruption threatens the auto maker's production as well as the opening of its new Delta Township, Michigan, plant, scheduled for 7 Aug. The move also threatens other GM plants as Goodyear supplies tyres to almost all of its North American assembly plants, the auto maker said. Goodyear supplies more than 8 million tyres annually to GM.

GM is seeking an injunction against Goodyear to compel the tyre maker to supply products to GM pending resolution of the dispute. GM also is seeking an order to continue working under the existing contracts for their entire terms as well as unspecified damages, legal fees and other costs.

“Goodyear has refused to comply with the terms of its contracts with GM and has stopped producing and/or shipping its products to GM, in breach of the parties' contracts, unless GM meets its unilateral demands to pay it substantially higher prices than the fixed prices in the contracts, as well as other demands contrary to Goodyear's contracts with GM,” the GM lawsuit said. “Although GM offered to pay the increased prices under protest, to avoid the irreparable harm a shutdown of assembly plants could cause, Goodyear has not accepted those terms, forcing GM to file this action.”

The lawsuit was filed in Macomb County Circuit Court in Michigan. GM's global purchasing and supply chain unit is in Warren, in Macomb County.

In a statement, a Goodyear spokesman said the tyre maker had read the complaint though it had not been officially served.

“Goodyear believes that the complaint is unfounded and mischaracterises the current relationship between Goodyear and General Motors,” the tyre maker said. “Goodyear is supplying tyres to GM on valid contracts. This disagreement is limited in nature, and Goodyear is within its rights relating to all actions taken. We are disappointed that GM has chosen this response, and we are currently in discussions, remaining hopeful that the matter will be resolved amicably.”

In the lawsuit, GM said Goodyear was seeking higher prices from the auto maker because of increases in raw material costs. GM said the tyre maker was expecting a $22.3 million increase in such costs in 2006. GM further said Goodyear indicated in a 19 July letter that it would immediately cease work on various supply programmes with GM.

But GM claimed in the court documents that its contract with Goodyear does not allow the tyre maker to refuse to perform its supply duties or demand price increases. GM said in the suit that it later offered to pay the increased prices under protest while “preserving its legal rights,” but Goodyear did not accept that offer.

From Tire Business (A Crain publication)