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Chrysler investigated after collapse of Getrag deal

Thu, 26 Mar 2009

The state of Indiana is investigating Chrysler LLC for securities fraud over the collapse of a joint venture with Getrag Transmission LLC.

Jim Gavin, a spokesman for Secretary of State Todd Rokita, today confirmed a Kokomo Tribune report that said the investigation began two weeks ago. "There have been no complaints or allegations made," the paper quoted Rokita saying in a speech Tuesday.

The $530 million joint-venture plant, in Tipton County, would have employed about 1,200 to make dual-clutch transmissions. The venture dissolved in the wake of Getrag's filing for Chapter 11 bankruptcy protection in November. The filing came after Chrysler sued Getrag, claiming the supplier had failed to secure the necessary financing.

At issue in the investigation are Tipton County revenue bonds sold to Chrysler and Getrag. The Tribune said the county sold $11 million in bonds to the two companies.

'Good faith effort'

Chrysler in a statement today said it had offered to transfer $5.5 million in bonds to the county as part of its "good faith efforts to minimize the impact" on the community. The automaker blamed the dispute on "Getrag's failure to arrange required financing for the project."

The statement said Chrysler had previously paid for $14.5 million in "infrastructure improvements" around the plant. Tipton County officials could not be reached for comment. Gavin said Chrysler's offer would not affect Indiana's securities investigation.

Michelle Culver, spokeswoman for Getrag, said the company had no comment on the investigation because it's not the subject of the state's scrutiny. Gavin stressed that the state is investigating Chrysler, not Getrag.

The companies have traded charges since the venture failed. In February, Mitchell Roob, Indiana's secretary of commerce, urged Chrysler to use some of its $4 billion in federal bailout funds to pay more than 40 contractors who had not received money for their work. Chrysler responded that contractors were hired by Getrag.

Getrag argued that it was Chrysler that quit the project. The supplier said it is "pursuing court action against Chrysler seeking to enforce commitments Chrysler made to the project."

By Bradford Wernle- Automotive News