Getrag: Chrysler backing out of Tipton County transmission plant

Talks between Chrysler LLC and Getrag Corporate Group have shut down.

Late Friday, Getrag issued a press release stating Chrysler has rejected the financing structure the German transmission manufacturer has secured to build a joint venture in Tipton. Furthermore, Getrag said, Chrysler has elected not to purchase the transmissions to be manufactured by Getrag.

The news of the breakdown leaves the plant's future uncertain.

The two companies have been in talks since Chrysler recently filed a lawsuit in a Michigan court allegedly a breach of contract on Getrag's behalf regarding financing for the new plant.

"Chrysler has rejected the financing structure that Getrag had offered together with its banks, which required Chrysler to secure some of their obligations under the supply agreement, and has elected to terminate the supply agreement and related documents," read Friday's statement from Getrag.

Getrag said it was astonished by Chrysler's action, so much so that it has opted to make counterclaims to Chrysler's lawsuit.

"Getrag intends to vigorously defend the lawsuit and file counterclaims against Chrysler to recover damages suffered by Getrag caused by Chrysler's conduct."

In an interview Friday afternoon before Getrag's announcement, Randy Cyman, Getrag's human resource director in Tipton, confirmed the companies had been meeting but nothing was resolved.

When asked if work at the Tipton plant would continue, Cyman had no comment.

Bob Sowinski, project manager for Walbridge Construction, said there was no truth to rumors that work would cease.

Chrysler spokesman Dave Elhsoff would not confirm or deny that talks had taken place.

Friday's action casts further speculation on the future of the plant.

Work on the plant was stopped from Dec. 21 through Feb. 25 because of a financial dispute between the two companies.

How we got here

In June 2007, Getrag and Chrysler officials announced a joint venture to construct a $530 million plant in Tipton County at the intersection of U.S. 31 and Ind. 28. The plant was expected to employ up to 1,400 employees, including many of the laid-off United Auto Workers members from the Chrysler plants in Kokomo.

The dual-clutch wet transmissions that were to be manufactured by Getrag were to be teamed up with the new Phoenix engine that would be used in new Chrysler models being introduced next year. The Tipton plant was expected to produce up to 700,000 transmissions annually.

Earlier this month, Chrysler filed a lawsuit accusing Getrag and its U.S. subsidiary of breach of contract and fraudulent misrepresentation of Getrag's ability to obtain financing for the Tipton County plant.

Chrysler alleged that Getrag was seeking to obtain $300 million in financing from the German national bank and that the bank wanted Chrysler to put that amount in an escrow account.

The state of Indiana offered Getrag $12.65 million in incentives to locate in Tipton County, including $8.75 million in performance based tax credits and $500,000 in training grants. The Indiana Department of Transportation provided $3.4 million for improvements to Ind. 28.