Write 3–5 paragraphs on the Chrysler, LLC, Versus Plastech Engineered Products Inc. Vignette in Chapter 17. Address the following questions:
1. Who is really at fault?
According to the case study, Plastech’s entered into two Accommodation Agreements with Chrysler before bankruptcy (Burt, Petcavage, Pinkerton & Burt, 2010). Chrysler is one of the largest customer of Plastech. Plastech is manufacturing the injection molded parts for the interiors of the automobiles by Chrsyler. Chrysler sell these interior as their own product or OEM’s. Plastech was unable to drop the cost of these OEM’s to the desired level and hence they were bankrupted. Chrysler is therefore responsible as they have to provide the finances to Plastech for the parts that had unexpectedly rising costs and made it difficult for Plastech to sustain its production. There are also concerns about the increased operational costs by Plastech which they should have been able to control.
2. Could the legal issues between Chrysler and Plastech have been resolved in a more constructive manner without litigation?
Yes, the legal issue between Chrysler and Plastech could have been resolved in a more constructive manner without a need for litigation. There was a lack of trust and a situation of miscommunication between the two companies in my opinion. These companies should have sat together and defined the problem that existed. Then there could have been discussions about how this situation has been reached and what the way out is? Both companies could have shared some of the burden and reached a settlement. In the case study it is stated that the OEM did agree to pay a bailout package to Plastech. This bailout package could well have resulted without a need for litigation. This bailout package could have been provided in the form of a price increase. This is how the production of the parts for automobiles could have become viable for Plastech and they might have not bankrupted.
3. How could this situation have been prevented?
This situation could have been prevented if there was a proper forecasting of the raw material that Plastech acquired for the production of the automobile parts. They could also have worked on cost cutting in the operational costs that is reported to be higher than what actually it should have been. In my opinion, each business should have a department that is aimed at forecasting and predicting the market trends. This department can help in making safe investments for an organization.