Ruling upheld against Intier
Magna subsidiary tried to cancel deals with Axiom
Small auto parts supplier refused to cut prices by 31.8%

TONY VAN ALPHEN - BUSINESS REPORTER - TorontoStar

A Magna International subsidiary has lost a bid to overturn a court decision that stopped it from cancelling contracts with a small auto parts supplier.

Mr. Justice John Jennings of the Ontario Superior Court of Justice rejected a motion by Intier Automotive for leave to appeal a lower court ruling that granted an interim injunction and blocked the firm from cancelling agreements with Aurora-based Axiom Group.

"It is clear the motions judge applied the correct legal test for the granting of an interlocutory injunction," Jennings said in rejecting the Intier request for leave to appeal.

In February, Madam Justice Harriet Sachs granted the injunction that prevented Intier from terminating about 40 contracts until a trial resolves a dispute between the two firms.

Sachs said Intier did not give reasonable notice of the cancellations and therefore put Axiom in a position of suffering irreparable damage.

She rejected Intier's argument that an injunction would determine the outcome of a lawsuit by Axiom, which claims the contracts cover the life of vehicle programs if they meet performance terms. Some of the contracts extend to 2009.

In his decision last week, Jennings said Sachs was correct in ruling Axiom had made a strong case that Intier's notice was unreasonable and there are still serious issues for trial regarding whether it was required and proper.

Last year, Intier demanded that Axiom slash its prices on existing contracts by 31.8 per cent. Axiom, which makes small components for window systems, said such a cut would eventually kill the company.

Intier said it had to push for the cuts in prices because of pressures from auto makers such as DaimlerChrysler and General Motors.

Axiom, which had resisted some earlier demands, charged Intier knew that the deep price cuts would cripple the company, trigger major layoffs and hurt its reputation.

Axiom also said Intier cited financial pressures at a time when the Magna subsidiary was making unprecedented profits. Since the start of the dispute, Magna, also of Aurora, has taken Intier private.

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 so-called Tier Two suppliers such as Axiom are under pressure to cut costs during existing contracts or face losing future business.