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In his decision, Shefferly said allowing Chrysler to repossess its tooling so early in Plastech's bankruptcy proceedings "will likely destroy the possibilities for an effective reorganization."
Chrysler will suffer some economic harm, Shefferly said. But the automaker has numerous options, including procuring more tooling for alternate suppliers or going back to the bargaining table with Plastech, he said.
Chrysler said it was disappointed in the decision. The company wouldn't say what its next step will be.
"We will continue to work with all parties to ensure that our plants continue to receive deliveries of parts," Chrysler spokesman Kevin Frazier said in a statement.
Plastech general counsel Kelvin Scott said the supplier was pleased with the court's decision.
"We look forward to continuing to work with Chrysler," he said.
Shefferly said Chrysler will have an opportunity for further court action on the question of its rights to terminate its contracts with Plastech. He also said Plastech should take advantage of the opportunity to renegotiate with its customers and lenders.
"The law affords that breathing space to the debtor when it filed its Chapter 11 petition for relief. But it is not unlimited, and the debtor should use it wisely," Shefferly wrote.
Dearborn-based Plastech supplies Chrysler with about 500 plastic parts. Chrysler paid Plastech around $200 million annually for parts, or 13 percent of Plastech's overall sales.
Plastech filed for bankruptcy protection Feb. 1 after failing to negotiate a bailout package with its customers. Chrysler terminated its contract with Plastech after the filing and Plastech stopped shipping parts, forcing a one-day shutdown at four Chrysler plants until an agreement to resume shipping was reached.
That agreement was extended in court last week. Plastech is now supplying parts to Chrysler through Feb. 27.
