May 1 (Bloomberg) -- General Motors Corp. paid almost C$1 million ($843,000) for a faked piece of equipment and spent another C$1 million tracking down tools a Canadian parts maker had hidden after a price dispute, the company said.

GM, Chrysler LLC, Gates Corp. and Magna International Inc. plan to ask Ontario Superior Court Judge Alexandra Hoy next month to return to them money she had ordered set aside until their dispute is resolved with Transcast Precision Inc., which on March 27 acquired the assets of Vannatter Group Inc.

Transcast shut its factory in Wallaceburg, Ontario, after GM, Chrysler, Gates and Magna on April 1 refused to enter into long-term contracts for parts at prices that were double, or more, what they had paid. Vannatter employees referred to the demands as “ransom notes,” according to court documents. Transcast cut off supplies, forcing Auburn Hills, Michigan-based Chrysler to idle two Ontario plants April 1 and April 2.

“Transcast by its wrongful conduct attempted to create leverage to force GM to pay grossly inflated prices,” Scott Garcia, commodity manager of GM Powertrain, said in a court document. “Transcast should not reap the rewards of its wrongful conduct.”

Hoy on April 3 ordered Transcast to provide the automakers with parts to allow 14 days of production and to return their tools and machinery. The judge ordered the automakers to pay twice the price of parts they received, in GM’s case C$800,307, which went into a court-administered account. Aurora, Ontario- based Magna paid C$412,134, or 1.75 times the original price.

Another Creditor

Hoy had ordered the creation of the account to protect Transcast in case the automakers filed for bankruptcy, in which case Transcast would be just another creditor in the proceedings. This way Transcast will have access to the money if it wins the case.

The automakers have filed hundreds of pages of sworn testimony from former employees at the Transcast plant and its own workers to support claims that Vannatter and Transcast ignored contract terms, forged documents and hid equipment that belonged to automakers.

GM, based in Detroit, paid an additional C$886,050 into the court-administered account for four new tools used in refining aluminum casted components that Transcast said were sent to the automaker. The tools were faked and GM was sent old equipment it had already paid for, Todd Sharpless, former account manager at Vannatter, said in a court document.

New Tags

“I placed new GM tags on the existing machine tools, I photographed the existing machine tools and submitted these photographs to GM in order to convince GM that the new machining tools had been installed,” Sharpless said in the sworn statement. He said he was acting on the orders of Vannatter’s general manager.

The tools GM was to have received were put into a “remote part” of a warehouse, hidden by shrink wrap under a storage rack, Sharpless said.

The forgery of the tools would have occurred before Transcast bought Vannatter’s assets, Transcast President Dean Topolinsky said in a telephone interview today.

Topolinksy denied claims made by Vannatter’s former employees that he and his officials were effectively running the company before taking possession. There were 16 to 20 trailer- loads of tools and equipment GM, Chrysler, Magna and Gates owned and many were not easily identifiable, Topolinsky said. He said there was no effort to hide them.

“Transcast had nothing to do with Vannatter, or its past,” Topolinsky said. He said he hopes to reopen the plant.

Vannatter, which made engine brackets and transmission mounts, had about 100 people working at the plant and was the biggest employer in Wallaceburg, a mostly farming community about 70 miles northwest of Detroit.

Two Sides

“There are two sides to this story,” Transcast’s lawyer Justin Fogarty told Hoy at a scheduling hearing this week. “Things are not as they seem.”

Sharpless, who said he had been with Vannatter for five years and declined to work on contract for Transcast after the plant was shut down, said it was obvious to him the company wouldn’t resume operations.

“When I reviewed a copy of the ransom note I knew immediately that Vannatter’s business would never operate again,” he said in an April 23 sworn statement. “In my experience with the automotive industry, I had never seen anything as outrageous as this, nor anything that would upset customers so much.”

The case is Between General Motors Corp. and Vannatter Group Inc. File No.: CV-09-8113-00CL. Ontario Superior Court of Justice (Toronto).

To contact the reporters on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net.

Last Updated: May 1, 2009 13:58 EDT