Chrysler sues Daimler over key vehicle parts

updated 2:23 p.m. ET Aug. 26, 2009

NEW YORK - Chrysler Group LLC has sued Daimler AG, accusing the German automaker of failing to abide by contracts requiring it to supply crucial parts and putting the production of key 2010 Chrysler vehicles in jeopardy.

The Auburn Hills, Mich.-based company said without the Daimler-supplied steering columns and torque converters it will be unable to produce several 2010 model-year vehicles, including the Chrysler 300 and the Jeep Grand Cherokee SUV.

Chrysler filed the lawsuit in bankruptcy court in New York on Friday and is seeking unspecified damages from Daimler.

Chrysler emerged from Chapter 11 bankruptcy protection in June after the bulk of its assets were purchased by Italian automaker Fiat Group SpA. A large portion of Chrysler's liabilities were left behind and are being liquidated under court supervision.

The lawsuit revolves around dispute over payments for diesel engines supplied by Daimler. Chrysler accused Daimler of using the dispute as a basis for refusing to sign deliveries of steering columns and torque converters.

"Chrysler Group believes Daimler's effort to extort Chrysler Group into paying for costs for a diesel engine that Daimler agreed to forego a few months ago is a breach of its obligation to negotiate in good faith," the company said.

If deliveries of the parts stops, a Chrysler spokesman said, it would affect production at its assembly plant in Brampton, Ontario, and its Jefferson North plant in Detroit.

Daimler said Chrysler's lawsuit is "without merit."

"This is not a dispute about Chrysler's rights to existing contracts ... Rather Chrysler has been asking Daimler to change existing agreements and enter into completely new agreements," Daimler said in a statement.

Daimler owned Chrysler for several years until it sold its stake to private-equity firm Cerberus Capital Management LP in 2007.

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