Tower Automotive seeks court OK for $13.5 million Unova settlement

By Caroline Salls

Pittsburgh, Sept. 16 - Tower Automotive, Inc. requested court approval of its $13.5 million assembly line litigation settlement agreement with Unova Industrial Automotive Systems, Inc. and Unova, Inc., according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

In May 2002, Tower Automotive filed claims against Unova Industrial asserting damages for breach of contract, breach of warranty, promissory estoppel and fraud in connection with a $45 million commercial agreement between Tower and Unova Industrial for the turnkey design, manufacture and installation of an automated assembly line system at Tower's manufacturing facility in Corydon, Ind. Tower intended to use the assembly line for the production of vehicle frames for the Ford Explorer.

In response, Unova Industrial denied - and continues to deny - the allegations in the complaint and also filed a $2 million counterclaim against Tower alleging unpaid services related to the Corydon Assembly Line.

According to the motion, although Unova Industrial did design and install the Corydon Assembly Line, the system was never able to meet the company's specified manufacturing requirements, causing it to incur significant additional expenses associated with attempts to re-work the Corydon Assembly Line and expend additional labor hours in connection with operating the line in order to meet the customer's requirements for the frames.

Specifically, Tower asserts $50 million in damages from excess labor costs and related overhead.

Under the settlement agreement, Unova and Unova Industrial will pay Tower $13.5 million and have agreed to release Tower from any future claims or causes of action in connection with the assembly line litigation.

In exchange, Tower has also agreed to release Unova and Unova Industrial from any future claims or causes of action in connection with the assembly line litigation.

A hearing is scheduled for Sept. 27.

Tower, a Novi, Mich.-based auto parts maker, filed for bankruptcy on Feb. 1, 2005. Its Chapter 11 case number is 05-10578.

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