logo

Whirlpool files breach of contract suit against Ohio molder Core Systems

By: Michael Lauzon

January 29, 2013

ST. JOSEPH, MICH. -- Injection molder Core Systems LLC has shut down its Mount Gilead, Ohio, plant, and the company is being sued for breach of contract by appliance major Whirlpool Corp.

Whirlpool notified Core Systems of Painesville, Ohio, that it was launching a suit that orders Core Systems to surrender tooling owned by Whirlpool. The lawsuit was filed Jan. 24 in the U.S. District Court in Cleveland.

The Morrow County Sentinel reported that Core Systems closed its Mount Gilead injection molding facility in response to the lawsuit and tooling take-back.

"Whirlpool Corp. can confirm, that after several months of discussions, it has decided to end its business relationship with Core Systems," the Benton Harbor, Mich., firm stated in a prepared statement.

"Whirlpool Corp. continually evaluates and monitors its supply base and makes adjustments to ensure it can consistently, and without interruptions, deliver best cost and quality to our customers," the statement said.

Core Systems officials were not immediately available to comment on the case or reported closure.

In a complaint filed with its lawsuit, Whirlpool said Core Systems failed to meet delivery schedules frequently in 2012, including nine separate times in a 10-week period. In once instance, Whirlpool had to shut down an entire line and send workers home, the company said in the complaint.

According to the suit, on Jan. 11 Whirlpool and Core Systems signed a written Performance Improvement Plan, with steps aimed at improving Core Systems' quality, performance, delivery and competitiveness.

According to the suit, the companies agreed that if Core Systems failed to meet targets set in the plan, Whirlpool could take action including finding another source for the plastic parts business.

On Jan. 21, 10 days after signing the improvement plan, Core Systems informed Whirlpool that it owned $1.3 million to raw-material suppliers and other vendors, and that it had only $11,000 in cash and no immediate prospect for financing.

Core said it would begin shutting down the plant on Jan. 24 if it did not immediately pay at least $250,000 to two suppliers, according to the complaint. Core asked Whirlpool at least $250,000, and for $900,000 in revolving financing.

Whirlpool said no and decided to move molding work from Core to other suppliers, according to the suit. When Core refused to turn over tooling, Whirlpool filed the lawsuit.

Core Systems' secured creditor Wells Fargo Bank has agreed that it would not make a claim on Whirlpool's tooling. Core Systems' other secured creditor is JPMorgan Chase Bank.

The court has ordered Core Systems to remove relevant tooling from its facilities, and parties to the lawsuit are scheduled to appear in court on Jan. 30 to gauge how the removal is going.

Core Systems was founded in 1997. It is a major supplier to the home appliance industry, with Whirlpool being one of its biggest customers. It had estimated sales of $47 million for fiscal 2011 ended Sept. 30.