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Wins Injunction Against Intier
Granted Contract Injunction
business with Intier intact; Trial next step in auto firms' dispute
From the Toronto Star Feb. 19,
2005. Business Section Front Page
A small Aurora
auto-parts supplier has won a major legal battle by stopping
industry giant Intier Automotive Inc. from canceling contracts.
By: TONY VAN
Axiom Group Inc.
gained a court order for an interim injunction yesterday that
prevents Intier from immediately terminating about 40 contracts
until a trial resolves a dispute between the two firms.
Harriet Sachs ruled Intier, controlled by Magna International, did
not give reasonable notice of the cancellations and, as result,
Axiom would suffer irreparable harm if an injunction is not granted.
"In this case,
there was compelling evidence that if the injunction is not granted,
Axiom will be put out of business and suffer irrevocable damage to
its business reputation," Sachs said in a 12-page judgment.
Axiom sued Intier
last month for more than $30 million for allegedly breaching
contracts. It also sought the injunction to force Intier to honour
contracts until a court hears the lawsuit.
puts the brakes on Intier's abrupt termination," said Axiom's
lawyer David Sterns. "Axiom will now have its day in court and
will not have to suffer judgment before trial."
Sterns said it
could take longer than a year before a trial starts.
A lawyer for Intier
could not be reached on whether the company will seek an appeal.
The case has
attracted the attention of many players in the highly competitive
auto industry over the issue of how far companies can go in their
efforts to reduce costs.
Many smaller or
so-called Tier 2 suppliers are under pressure from higher-tier
suppliers to cut costs during existing contracts or face losing
"This is not
just a win for Axiom but for the whole industry," said Axiom
president Perry Rizzo.
Last year, Intier
demanded that Axiom slash its prices on all contracts by 31.8 per
cent. Axiom, which makes small parts for window systems, said such a
cut would eventually kill it.
It rejected the cut
and offered a much smaller reduction. Intier responded in the fall
by giving a 90-day notice that it would cancel Axiom's contracts.
Intier later agreed to continue accepting deliveries pending a
decision on the injunction application.
At a hearing
earlier this month, Intier argued it had to push for cost cuts from
its suppliers because of pressure from auto makers such as
DaimlerChrysler and General Motors.
contracts with Axiom as "uncompetitive" and said it had
the right to cancel them with reasonable notice. But Axiom countered
that Intier can't unilaterally kill the contracts. Axiom said Intier
knew acceptance of the cuts would bankrupt the company; it would
cause default on loans, trigger layoffs of two thirds of 145 workers
and hurt the firm's reputation.
Intier also didn't
impose the same cuts on other suppliers, Axiom said.
said Intier cited financial pressures for the moves at a time when
the Magna subsidiary was making unprecedented profit.
Axiom noted it had
built a lengthy relationship with Intier and had spent millions of
dollars to meet production demands.
In view of the
relationship and investment, Sachs said in her decision that Axiom
had made a strong case that Intier's 90-day notice was not
Intier had argued
that if Axiom got the injunction, it would effectively get the
relief it is seeking at trial.
But Sachs disagreed
and noted Axiom's claim is that the contracts extend to the life of
vehicle programs by the auto makers. Some Axiom contracts continue
In weighing the
impact of an injunction on the companies, Sachs said Intier, which
generates annual sales of more than $4.65 billion (U.S.), would save
about $1.7 million or a "fraction" of its business by
pulling the Axiom contracts.
"By way of
contrast, if the injunction is not granted, Axiom runs a real risk
of going out of business," she added.
Axiom has annual
sales of about $14 million with 60 per cent coming from Intier.