Parts Firm Granted Contract Injunction
Axiom's business with Intier intact; Trial next step in auto firms' dispute

From the Toronto Star Feb. 19, 2005. Business Section Front Page
By: TONY VAN ALPHEN

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.

Madam Justice 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.

"This decision 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 future business.

"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.

Intier described 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.

Furthermore, Axiom 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 reasonable.

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 until 2009.

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.