GM's Suit Against Goodyear Moves to Federal Court

GM’s Suit Against Goodyear Moves to Federal Court

A lawsuit General Motors Corp. filed last month against the Goodyear Tire & Rubber Co. entered federal court Wednesday, accusing Goodyear of threatening to stop tire deliveries for GM's new vehicles. The vehicles involved, including the Saturn Outlook and GMC Acadia, are among the most important models GM will introduce over the next year. The automaker is counting on them to contribute strong sales and billions of dollars to keep its recovery on track.

From Detroit Free Press

The vehicles involved, including the Saturn Outlook and GMC Acadia, are among the most important models GM will introduce over the next year. The automaker is counting on them to contribute strong sales and billions of dollars to keep its recovery on track.

In the suit, which started in Macomb County Circuit Court and transferred to a U.S. District Court in Detroit, GM says it was forced to seek legal action after Goodyear asked for an extra $22.3 million on July 19, the eve of GM’s first day of production at its new Lansing Delta Township plant.

Revising its request July 29, Goodyear asked for $15 million to continue tire deliveries, which GM agreed to only to maintain its production schedule, a letter GM attorney Marilyn Peters sent to Goodyear’s attorneys says.

The Detroit automaker wants to get back the extra money it paid to meet Goodyear’s demands. The most recent contract was established in December 2005.

"Goodyear is disappointed that GM has chosen this course of action," Goodyear spokesman Ed Markey said Wednesday. "We continue to believe that the complaint is unfounded, and we will defend ourselves in court."

GM spokeswoman Deborah Silverman said GM "has a longstanding relationship with Goodyear."

The lawsuit reflects the embedded tension between automakers and suppliers.

Automakers want parts for the lowest cost to save money. Suppliers want to sell parts for the best price to make money.

Rising raw materials prices have forced parts makers to charge more for their components. Goodyear supplies more than 8 million tires to GM every year.

If Goodyear had followed through with stopping tire shipments for selected models, production at GM’s Delta Township plant would have started late, and GM would have been forced to shut down one line at its Flint Assembly plant and ultimately layoff employees, the lawsuit says.

The new Delta Township plant will produce three important and high-profile new SUVs over the next few months. Two are key to GM’s plans to invigorate its Saturn and Buick brands, while the third should give GMC a new fuel-efficient eight-passenger vehicle to offset flagging sales of the Envoy midsize SUV. The Saturn Outlook and GMC Acadia are to go on sale this year, with the Buick Enclave following in 2007.

GM has touted the vehicles, which look like traditional SUVs but use a lighter structure for a more comfortable ride and higher fuel economy, as its first true competition for models like the Honda Pilot and Toyota Highlander.

The Flint plant produces GM’s highly profitable heavy-duty Chevrolet Silverado and GMC Sierra pickups. GM is about to launch an all-new version of those full-size pickups. It speeded the introduction of the new trucks by several months to boost its cash flow, and to get them established in the market before the new Toyota Tundra pickup goes on sale next year.