American Axle Sues Republic Engineered Products Over Deliveries

June 18, 2009
Steelmaker questions the companys viability, among other concerns
American Axle & Manufacturing Holdings Inc. has filed a suit against steelmaker Republic Engineered Products Inc., charging that it properly terminated a supply contract. The producer of automotive and truck drivetrains also seeks a preliminary injunction and temporary restraining order to force Republic to comply with the terms of their four-year contract. Republic has failed to meet requirements of the contract, according to American Axle, by demanding volume commitments and price increases that are not indicated in the agreement. Republic supplies as many as 250 special bar-quality (SBQ) steel products to American Axle, but allegedly discontinued its contracted supply in April because of past-due payments. The steelmaker contends it canceled the contract, and adds that it tried for several weeks to negotiate new terms and conditions to continue supplying steel to American Axle "at current market pricing." American Axle’s petition in a Michigan Circuit Court seeks an immediate ruling on the matter, but Republic’s response aims for a trial on the matter of the contract termination. In addition to the past-due account, Republic claims it stopped shipments because American Axle was the subject of a “going concern” notice from its own auditors; because it fell out of compliance for listing by the New York Stock Exchange (it has subsequently regained its “compliant status); and because the company relies on General Motors Corp. and Chrysler L.L.C. for up to 75% of its product sales. Both automakers have declared bankruptcy. Republic says it wants assurance that American Axle will pay the past-due accounts and commit to pay future invoices on a firm delivery schedule.