Courts to decide if GM's price bargains led CCM to bankruptcy
- General Motors (GM) recently asked a judge to dismiss a supplier's lawsuit against the company, claiming the plaintiff is attempting to pass blame for poor management onto the automaker, The Wall Street Journal reports.
- Clark-Cutler-McDermott (CCM), GM's supplier, alleges the defendant knowingly led the now-bankrupt company into a bad faith deal. CCM claims GM's consistently bargained for prices unsustainable for the supplier, while encouraging the supplier to expand and take on more debt, according to the Journal.
- The case will be heard October 14 at the U.S. Bankruptcy Court in Worcester, MA.
At first glance decreasing prices while taking on debt and expanding may seem a clear-cut case of mismanagement, but suppliers dependent on large companies know the buyer has undue influence over company decisions in many cases.
Simply, if the supplier sells even 10% of its inventory to a large company and is not the buyer's only choice, the latter can demand significant price decreases as the cost of keeping business. Doing so year after year can drive a company bankrupt. However, GM claims it did not have any other supplier for those parts and could not use that as leverage.
The court case this Friday will provide significant insight into the circumstances and bargaining practices, and the court's view of these may help send a message or set a legal precedent as to what sort of conditions are acceptable during negotiations.
- Detroit Free Press Supplier bankruptcy filing could disrupt GM production
- The Wall Street Journal GM Asks Judge to Toss Bankrupt Supplier's Lawsuit
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