A subsidiary of Daimler Truck North America said it faces “catastrophic” disruption to its manufacturing operation unless a federal court intervenes to keep its Mexico-based supplier from stopping parts shipments.
Detroit Diesel Corp. (DDC) filed an amended complaint to its existing lawsuit against Martinrea Honsel Mexico SA de CV on March 4 in the U.S. District Court for the Eastern District of Michigan.
The complaint asks the court to order Martinrea Honsel to keep shipping transmission housing parts DDC said it needs to produce heavy-duty trucks.
Martinrea International sent a letter to DDC Feb. 10 stating that Martinrea Honsel would stop sending parts after March 7.
“Inasmuch as the parts supplied by Martinrea pursuant to the [long-term agreement] are specially manufactured for DDC, and it is not commercially feasible for DDC to source these parts from an alternative supplier, the stop shipment threatened by Martinrea would have a catastrophic effect on DDC’s operations, those of its original equipment manufacturer customer, and those of DDC’s other suppliers, resulting in massive lost production, layoffs, and supply chain disruption, in addition to other irreparable harm,” DDC said in the March 4 complaint.
Martinrea Honsel Mexico is an automotive parts supplier with a factory in Queretaro, Mexico. The company is a subsidiary of Martinrea International Inc., a Canadian auto parts manufacturer based in Vaughan, Ontario.
The company cited a recent court ruling regarding release-by-release contracts, under which each release or order constituted a separate offer that the seller was free to accept or reject.
“The parties’ Amended and Restarted Long Term Agreement states that DDC will purchase “1 part to 100% of DDC’s needs for the parts. Under a recent decision by the Michigan Supreme Court, that does not obligate DDC to buy any precise share of its requirements from Martinrea Honsel. Instead it is a release-by-release contract. … Martinrea Honsel is free to stop accepting releases at any time, and it is exercising that right now,” according to a letter Martinrea International sent to DDC.
DDC sued Martinrea Honsul in June, alleging Martinrea is in breach of a parts contract to supply transmission housings DDC uses to manufacture vehicles. The two companies signed a long-term agreement in 2013 and extended the agreement in 2020.
Martinrea’s failure to keep up with orders caused DDC production losses of more than $18 million, DDC said.
“Martinrea began falling behind on its supply obligations in 2020, failing to meet the transmission housing volumes ordered by DDC and thereby breaching the [long-term agreement],” according to court filings.
DDC said it notified Martinrea of its alleged breach of the contract, after which Martinrea Honsel blamed the COVID-19 pandemic for the disruption to service.
“Martinrea attempted to invoke a clause of the [long-term agreement] providing that neither party shall be liable to the other for any delay or failure to perform where such delay or failure is caused by events beyond the reasonable control of the affected party, citing the COVID-19 pandemic,” court filings said.
Neither DDC nor Martinrea International responded to a request for comment from FreightWaves, and it was not immediately clear whether Martinrea stopped sending parts after March 7.
DDC operates a manufacturing facility in Redford, Michigan, producing heavy-duty engines and chassis components. DDC’s parent company is Daimler Truck North America, a subsidiary of German multinational corporation Daimler Truck AG.
Daimler’s brands include Freightliner, Western Star, Mercedes-Benz, Fuso, BharatBenz and Rizon.
The next court hearing is scheduled for 3 p.m. Monday.
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