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Auto parts manufacturer BorgWarner risks running out of an important part after its supplier allegedly wreaked havoc on the supply chain by refusing to deliver unless BorgWarner agreed to certain price hikes, according to a newly filed federal lawsuit in North Carolina.

Michigan-based BorgWarner Turbo Systems LLC said in a complaint Friday that Modern Industries Inc. is holding hostage key parts for assembling turbochargers that BorgWarner supplies to equipment companies like John Deere and Caterpillar. This has caused its plant in Arden, North Carolina, to run out of inventory and forced at least one customer to experience line shutdowns.

BorgWarner alleges it will run out of the parts again next month unless the court intervenes.

Allegations of Supply Chain Disruptions

"BorgWarner cannot continue to repeatedly give in to Modern's extracontractual demands; these demands have caused repeated supply chain disruptions which result in irreparable harm to BorgWarner's business, its relationship with customers, and even consumers like users of John Deere equipment who are unable to operate their own businesses when critical parts are unavailable," BorgWarner said.

According to the complaint, Pennsylvania-based Modern Industries is BorgWarner's single supplier for turbine housing parts, which are used in turbocharger assemblies supplied to original equipment manufacturers. Under the supply agreement, BorgWarner and Modern Industries allegedly agreed to firm prices, with BorgWarner not liable for cost hikes incurred by Modern Industries unless otherwise negotiated.

BorgWarner vs Supplier: Price Hikes and Order Refusals

But in late 2022, BorgWarner said, Modern Industries began asking for price increases and minimum order quantities that weren't contemplated by the supply contract. BorgWarner allegedly refused and, when negotiations failed, Modern Industries stopped sending shipments of the parts toward the end of 2023, causing the Arden plant to run out of inventory, the lawsuit states.

According to BorgWarner, it tried to remedy the stalemate by offering to "spot buy" certain purchase orders at the price Modern Industries requested, but the supplier refused to play ball. It wasn't until BorgWarner filed a motion for a temporary restraining order and injunction in November 2023 that Modern Industries relented, the auto parts maker said. However, Modern Industries still hasn't shipped the full amount of parts requested under those "spot buy" orders, BorgWarner said.

Escalation of the Dispute

Things further escalated in May when Modern Industries said it wouldn't ship any new releases, the complaint states. BorgWarner said it demanded assurances that Modern Industries would follow through on the shipments, but Modern Industries "did not provide a substantive response for a full week."