Getrag Files for Chapter 11

DETROIT (Reuters) – Getrag Transmission Manufacturing LLC filed for bankruptcy protection on Monday, citing a legal dispute with Chrysler LLC over an unfinished transmission plant it was developing in Tipton, Indiana.

Getrag Transmission was formed solely for the Tipton project, and the Chapter 11 bankruptcy filing does not affect other U.S. operations of Germany-based Getrag Corp, Getrag spokeswoman Michelle Culver said.

Chrysler [CBS.UL] sued Getrag last month over the $530 million facility that was to have about 1,200 workers, saying the supplier had failed to secure pledged debt financing needed to complete the plant. The plant was to produce fuel-saving dual-clutch transmissions for Chrysler.

Chrysler, which later terminated the supply contract, has said it would not reimburse the costs already absorbed by the private German supplier for construction of the plant.

The breakdown of the deal between Getrag and Chrysler is one of several disputes between the automaker and its suppliers to become public in recent months.

Chrysler’s sales have fallen 26 percent in 2008 through October, much deeper than the 15 percent decline in U.S. auto industry sales overall.

Getrag Transmission owes more than $500 million to over 200 parties related to the plant, which is 80 percent complete, according to documents filed with the U.S. Bankruptcy Court for the Eastern District of Michigan.

“As a result of Chrysler’s actions in regard to the project … the company sustained significant damages, to the extent that the company may no longer be viable as a business entity,” Getrag Transmission said in court documents.

Chrysler was not available for comment.

Getrag spokeswoman Culver said the parts supplier was still assessing what to do with the Tipton facility. Work was suspended on the plant in October after Chrysler terminated its supply agreement.

Chrysler, owned by Cerberus Capital Management, and Getrag had announced plans for the Tipton plant in 2007, with expectations that production would start in 2009.

Chrysler asserted in a lawsuit filed with Oakland County Court in Michigan on Oct. 8 that Getrag had failed to obtain debt financing worth up to $300 million within the required time frame, jeopardizing the project.

Getrag has denied any breach of the terms of the supply contract. It said in court papers on Monday that Chrysler was required to purchase exclusively from the company and reimburse up to $305 million for machinery, equipment and tooling costs. (Reporting by Soyoung Kim; Editing by Toni Reinhold)