General Motors' (GM) request to terminate its precious metals contract with Stillwater Mining Company has been granted by a federal bankruptcy court, it emerged yesterday (22nd July).

The financially-troubled US automaker has been receiving palladium and rhodium from the Montana-based miner for use in its catalytic converters for the past ten years.

However, it recently outlined a desire to focus on similar deals with suppliers in Russia and South Africa, claiming that it could no longer afford its contract with Stillwater.

In a hearing at the US Bankruptcy Court in New York on Wednesday, the Detroit-based giant's case was approved and the deal was subsequently cancelled with immediate effect.

The decision has been heavily criticised by Stillwater, which believes that GM should honour the agreement after receiving $50 billion in government bail-out loans.

Chairman and CEO Francis McAllister said: "We clearly are very disappointed with this outcome and are still assessing what additional avenues may be open to us in this matter.

"While losing our GM supply agreement certainly increases the company's exposure to any sustained decline in pgm prices, I believe the longer-term fundamentals of our industry are favourable and our competitive position is strengthening."

The news was also met with dismay by Montana's US delegation, including Democratic Senators Max Baucus and Jon Tester, and Republican Congressman Denny Rehberg.

In a letter to GM CEO Fritz Henderson, Mr Baucus and Mr Tester described the verdict as "appalling", claiming that the company would have folded without American taxpayers.

They wrote: "We are deeply disappointed with the completely unacceptable actions taken by General Motors over the past few weeks.

"We urge you to reconsider this decision and instead re-engage with domestic palladium producers as you move forward in the coming months and years."

Mr Rehberg added that GM was once a major supporter of the 'Buy American' approach and that Mr Henderson's 'car czar' has "a lot of explaining to do" about the deviation from this ideal.

"A decision like this clearly demonstrates what happens when you give the federal government the keys to private industry," he said.

"Seemingly taking a cue from the national addiction to foreign oil, General Motors is now putting its fate in the hands of foreign suppliers of palladium."

Meanwhile, Mr McAllister also revealed that Stillwater produced 137,700 oz of platinum and palladium during the second quarter of 2009, which is "well ahead" of its mine guidance of 495,000 oz per year.

Source:

GM drops Mont. mine in favor of foreign metals (22/07/09)

Court Approves GM Bankruptcy Request to Reject Stillwater Mining Company Supply Contract (22/07/09)

Montana Delegation Blasts GM for Dropping Stillwater Mining Contract (22/07/09)

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