GRAND RAPIDS — A bombshell new lawsuit alleges that Grand Rapids-based Tier 1 automotive supplier Gill Corp. is demanding “ransom” from its customers as the metal stamper dissolves its operations.
In a lawsuit filed Nov. 8 in the 17th Circuit Court for Kent County, Ann Arbor-based Benteler Automotive Corp. alleges that Gill is experiencing serious financial problems that have caused it to breach scheduling agreements, terminate shipments, and even refuse shipments until its customers agree to “certain exorbitant demands.”
Benteler alleges that Gill Industries has used its “extraordinary leverage” over its customers to make extra-contractural financial demands. Last month, Gill told Benteler that it was insolvent, had entered into a short-term forbearance agreement with its lender and was in the process of selling off its plants and operations, according to the court filings.
[RELATED: Gill reaches settlement with Benteler]
Gill then demanded Benteler sign a “wind-down agreement,” which includes a ban on moving production of parts to other suppliers for several months, immediate additional payments to the company and price hikes for remaining work, according to court documents.
“As a normal course of action when automotive manufacturing facilities consolidate operations or shut down a facility — as Gill is doing at our Bond Street site — customers of the manufacturer work toward a process that best fits the needs of all parties,” Gill President David DeGraaff said in an email to MiBiz, noting that the company has “successfully worked through these plans” with all other major customers and reached a tentative agreement with Benteler.
Gill manufactures component parts that Benteler incorporates into exhaust system assemblies used in the production of the Chrysler Pacifica and Dodge Caravan minivans, the Jeep Wrangler and Gladiator, Ford Mustang and Toyota Corolla, according to the company.
According to court filings, Gill told Benteler that it expects to close the Bond Ave. plant by April 2020, according to the lawsuit. However, Gill is under contractual obligation to provide parts to Benteler until at least 2038 via scheduling agreements signed in 2010 between Benteler and the former GR Spring & Stamping Inc., a company that Gill acquired in 2014.
Under a “stop-ship threat,” Gill demanded that Benteler sign an agreement that included an immediate $1.2 million payment to Gill “as ransom” and a 30-percent price increase, Benteler alleged in court filings. In effect, the demands require Benteler to pay approximately $70,000 per hour of press time “for the banks,” according to the filing.
“(The payments are) allegedly to fund operations, but more likely being used to pay down bank debt,” Benteler alleges in court filings.
In an email to MiBiz, Yves Ostrowski, head of communications and marketing at Benteler, declined to offer comment on the case, but noted “we are happy to give a statement as soon as the case is settled.”
Degraaff said he expects the “open issues” between the two companies to be resolved in the coming days.
In the lawsuit, Benteler asked the court to order Gill to continue regular production and shipments of four critical parts for a short time and then turn over related tooling and raw materials.
Benteler’s operations include a plant located on Hagen Drive in Grand Rapids and a Kalamazoo-area facility located on East Michigan Road in Galesburg.
Manufacturing operations at these two facilities are “wholly dependent” upon the supply of components from Gill, according to the company. Benteler said in the lawsuit that it could be forced to shut down both plants without timely deliveries of component parts from Gill. Such production disruptions at Benteler could trigger “catastrophic consequences” for manufacturing at Ford, Fiat Chrysler Automobile and Toyota Motor Co., as well as at other manufacturers throughout the automotive supply chain, according to the company.
“Given the impact to the automotive industry supply chain caused by the recent GM strike and tariffs, further disruptions to the automotive industry and the attendant harm to the Michigan and/or national economy must be avoided at all costs,” Benteler said in the lawsuit.
It remains unclear if Gill plans to move out early or close its plant at Avastar Park on Alpine Avenue in Walker before its lease is up in 2021. Haviland Consumer Products Inc., the plant’s current landlord after buying the property last year, has no updates about Gill’s lease, according to CEO and President Mike Karasiewicz.
Word of the financial troubles at Gill come just weeks after the company told MiBiz that it was exploring its options to sell its Bond Avenue NW property.
“It has become evident that manufacturing is no longer a fit for this site or the building due to constraints of new developments in the surrounding area that now includes office, restaurants, hotels and multiple apartments,” DeGraaf told MiBiz at the time.
Spectrum Health recently proposed a new $100 million administration and training facility at the Gill location, as MiBiz previously reported.
Gill currently manufactures from facilities in Grand Rapids and Walker, as well as Richmond, Ky. and Trenton, Ga. Gill told Benteler that it intends to sell at least some of its remaining operations to buyers who will continue to produce parts formerly made by Gill, according to court documents.
MiBiz Staff Writer Sydney Smith contributed to this report.