(Corrects percentage of revenue Magna and TRW received from Chrysler in sixth paragraph in story originally published May 15.)

May 15 (Bloomberg) -- Chrysler LLC plans to notify about 1,200 suppliers that they’ve been chosen to continue providing parts to the automaker after a new company it’s seeking to form emerges from bankruptcy.

The list represents an “overwhelming majority” of suppliers now serving Chrysler, the company said today in a statement. Those suppliers will also be told how much Chrysler aims to pay them for bills owed before the Auburn Hills, Michigan-based company sought Chapter 11 protection.

Chrysler intends to compensate the suppliers 40 percent of those payments while in bankruptcy and the remainder after the new company is formed, said Dave Elshoff, a company spokesman. At least five suppliers have filed for Chapter 11 this year as automakers cut production on the lowest U.S. vehicle sales rates since the 1980s.

“I know there was great anxiety in the supplier community when we announced Chrysler’s Chapter 11 filing,” Chief Procurement Officer Scott Garberding said in the statement. “This should be a great relief. The terms are fair.”

The company will notify the suppliers through a mailing. Chrysler sought bankruptcy protection on April 30 in New York and plans to sell most of its assets to a new entity formed with Italian automaker Fiat Spa within 60 days of the filing. Some of Chrysler’s unsold assets and liabilities will remain in court.

‘Some Clarity’

Earlier today, Chrysler in a court filing outlined a supplier payment plan, naming the companies who will be paid and the amounts they may receive. The suppliers include Magna International Inc., which relied on Chrysler for 12 percent of sales last year, and TRW Automotive Holdings Corp., which had 9.6 percent of its sales go to the automaker in 2008, according to regulatory filings.

“I’m glad to get some clarity on the issue,” Tom Kowieski, chief financial officer of Adac Automotive Inc. in Grand Rapids, Michigan, said yesterday after hearing about the payment plan. The company’s Adac Plastics Inc. division is slated to receive $4.09 million, according to the court documents.

Suppliers who disagree with the amount must file a complaint within 10 days of receiving the notice of payment and work with Chrysler to resolve the issue, or take the dispute to court June 4, according to the filing. If they can’t settle, the supplier’s contract or lease “shall no longer be considered,” according to the court filing.

Tracy Fuerst, a spokeswoman for Aurora, Ontario-based Magna, wasn’t immediately available for comment. TRW spokesman John Wilkerson declined to comment on the filing.

Amounts Owed

Chrysler, according to the filing, intends to pay various units of Continental AG, based in Hanover, Germany, about $70 million. Milwaukee-based Johnson Controls Inc., the world’s largest maker of automobile seats, is slated to receive more than $69.8 million. Van Buren, Michigan-based Visteon Corp. may get $22.3 million, according to the plan, and BorgWarner Inc., based in Auburn Hills, will receive about $17 million. Chrysler aims to pay Tokyo-based Yazaki Corp. $20.9 million.

The list is not final, the court filing said. More suppliers can be added for payment of pre-bankruptcy bills.

Chrysler said separately that it’s asking suppliers to stop participating in a U.S. Treasury aid program intended to help partsmakers. The plan provided $1.5 billion in funding to guarantee or immediately pay suppliers bills owed by Chrysler. To participate, suppliers had to pay a fee of 2 percent to 3 percent of the bills, known as accounts receivable.

Shuttered Plants

“While the program remains open at this time, Chrysler does not believe suppliers need to use the program as they will be economically better off being paid through the bankruptcy court process,” the company said in an e- mailed statement.

General Motors Corp., which faces a June 1 deadline to restructure out of court or file for bankruptcy, has said it will continue to use the program. The automaker has access to $3.5 billion in Treasury funding.

Chrysler has shuttered its factories until the new company is formed with Fiat. GM, which shares more than 50 percent of the same suppliers with Chrysler according to research firm CSM Worldwide, is closing 14 North American plants for as long as nine weeks this summer.

‘Won’t Make It’

The extended shutdowns are putting a cash strain on many suppliers, said Dan Cheng, head of A.T. Kearney’s North American automotive practice based in Southfield, Michigan, in an interview yesterday.

“Many of them won’t make it,” he said. “It will be difficult for these suppliers to start producing when production comes back on line.”

A shutdown of some critical suppliers could cripple U.S. auto production by depriving GM, Chrysler or Ford Motor Co. of parts needed to assemble their vehicles, Cheng said.

“If Chrysler doesn’t come back, and all of these suppliers have to eat this additional loss of cash, it could push more of them over and affect GM, Ford, Toyota, and all of the automakers that manufacture in the U.S.,” he said.

The case is: In re Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

To contact the reporter on this story: Alex Ortolani in Southfield, Michigan, at aortolani1@bloomberg.net.

Last Updated: May 18, 2009 09:44 EDT