BILLINGS --After nine months of negotiations with General Motors Corp., Stillwater Mining Co. officials learned Wednesday the automaker had petitioned bankruptcy court to reject the existing contract between the two companies.
Should the court accept GM's petition, Stillwater would be hit with a financial impact estimated between $5 million and $10 million.
Francis McAllister, SMC's chairman and CEO, said he was disappointed to learn of GM's petition.
"The company had been negotiating in good faith with GM and had already implemented two interim contract modifications at GM's request," he said.
Stillwater intends to file an objection to GM's petition with the bankruptcy court but does not know when to expect a response.
"We don't know the court's timeframe," said John Beaudry, spokesperson for SMC. "But, if Chrysler is any example, we expect the court may expedite it."
McAllister recognized the sacrifices that Stillwater employees have made -- including hundreds who have lost their jobs -- which have put the company in a stronger position. He said he believes Stillwater would be able to absorb the financial impact if metal prices remain at or above recent levels. But should they falter, as they have in recent days, the loss of the GM floor prices could become more critical to Stillwater's future.
The situation is aggravated by GM's apparent decision to purchase foreign metals.
"We certainly recognize that the current economic downturn has decimated the automotive industry, forcing GM and others to make some difficult choices," McAllister said. "At the same time, it seems disingenuous to me, during a period when preserving American jobs is such a high domestic priority, that GM, while receiving immense financial support from the U.S. government, would elect, as I understand it, to continue its supply agreements with foreign palladium suppliers while seeking to terminate an agreement with the sole U.S. miner of palladium."
The contract with GM, which establishes floor prices for the precious metals, is currently beneficial for the local mining company. Stillwater also contracts with Ford, which constitutes the larger of the two markets.
McAllister said Stillwater's operations are not sustainable at current prices without the floor prices established by the agreements. The company's objective is to reach sustainability by the end of 2010, when its contract with Ford expires.
McAllister said they have contacted Montana's congressional delegation and will soon meet with employees and union representatives to discuss the urgency of the situation.
"While by nature I am optimistic that we can find a mutually acceptable resolution to this issue, in reality that may not be possible," he said. "Should PGM prices decline over the next several months, loss of the GM contract ultimately could put our employees, their families and the communities where we live in economic jeopardy."