Chrysler cancels Getrag dual-clutch contract

Just as Chrysler was preparing to begin bringing a dual-clutch transmission to its North American fleet, a dispute with Getrag has sent plans for yearly production of up to 700,000 of the units up in smoke. Earlier this month Chrysler brought a lawsuit against Getrag, and now the German gearbox maker has revealed that the contract between the two companies has been canceled after a meeting on Friday.

The lawsuit is based on Getrag's failure to secure $300 billion in debt financing for the construction of the Tipton, Indiana plant that would build the gearboxes. Now both the plant and the supply agreement have been canceled, reports Automotive News, leaving Chrysler without a supplier for the new, more efficient gearbox technology in the U.S. For its part Getrag has decried the lawsuit by Chrysler as 'without merit' and said in a written statement announcing the result of Friday's meeting, "GETRAG is astonished by this action and will pursue all rights and remedies under the terms of the supply agreement for, among other things, reimbursement of all expenses incurred by GETRAG and its suppliers in connection with the project."

The essence of the suit brought by Chrysler revolves around a dispute over whether Getrag adequately sought financing. Chrysler believes it did not do so, but Getrag says it was only obligated to secure financing as long as the German government would guarantee it. The German government, however, would not guarantee the loan without a $300 million escrow account from Chrysler to secure repayment. Hence the lawsuit, which seeks damages for any investments Chrysler has made to this point. Nevertheless, construction work on the site of the planned facility is already underway, and still continuing as of today. Chrysler has long sought to become the leader in dual-clutch gearboxes in the U.S.

The extraordinarily poor credit market certainly has played a role in getting the two companies to their current adversarial situation, but that doesn't lessen the impact on either company. Chrysler had intended to use Getrag as its sole supplier of the advanced fuel-saving transmissions, but that's now off the table.

Chrysler currently offers two models in Europe with a dual-clutch transmission: the Chrysler Sebring and Dodge Avenger twin sedans. There had been no plans announced to bring those cars to the United States, but Chrysler has been looking for some time to include a great deal of the dual-clutch gearboxes in its fleet, and including those two cars in the plan would have made a great deal of sense in terms of sales volume. Now it's anybody's guess as to how the company will proceed, especially with open talk of mergers and acquisitions ongoing.