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You are here: MacNN Forums > News > Tech News > GT says Apple pulled 'bait-and-switch' in newly unsealed documents

GT says Apple pulled 'bait-and-switch' in newly unsealed documents
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Nov 7, 2014, 04:35 PM
 
As scheduled, the court overseeing GT Advanced's bankruptcy has unsealed more documents regarding the relationship between the sapphire supplier and former client Apple, which it blames for ultimately causing the collapse. In an unedited affidavit from GT COO Daniel Squiller, Apple is accused of using a "bait-and-switch" strategy in which it offered "an onerous and massively one-sided deal" in 2013. He says that Apple originally promised to buy sapphire furnaces for GT and let them operate them, but later demanded a "fundamentally different deal" in which Apple would only lend the furnaces and have no obligation to buy them, nor buy any of the sapphire GT produced.

Squiller says that GT accepted the new terms because it had "invested months negotiating a sale contract with Apple while being effectively locked out of pursuing other opportunities with Apple's competitors." Apple is claimed to have told GT not to bother trying to negotiate, since it "does not negotiate with suppliers;" Squiller remarks that this forced GT to agree to all of Apple's terms or jeopardize the deal completely, even though it imposed serious risks. Apple told GT to "Put on your big boy pants and accept the agreement," according to Squiller.

The COO charges that the relationship became "unsustainable" once Apple refused to take responsibility for expenses and cost overruns caused due to it exerting control over operations. Apple is in fact said to have picked fabrication equipment that "could not economically produce a product that Apple would accept," and yet denied requests to change out that equipment. Allegedly, the iPhone maker's involvement in running GT sapphire operations became so deep that the latter company had to "divert an inordinate amount of its cash and corporate resources" into its Mesa, Arizona sapphire plant, which was set up in partnership to supply Apple exclusively.

In separate documents, Apple insists that it has "bent over backwards" to work with GT, "including making payments to the company notwithstanding the company's failure to meet performance milestones, in the hope of obtaining usable, economically viable sapphire." It confirms that "Apple continued to fund the Debtors' operations at the Mesa facility by making payments under the Prepayment Agreement even though the Debtors failed to satisfy the original payment milestones."

In particular, GT was unable to produce sapphire at the 262kg boule size it originally agreed to. Apple states that it was willing to negotiate and accept a smaller size, and continued to offer "significant concessions" up until GT's bankruptcy. One of these involved paying out a big portion of the $139 million in its final tranche, and letting GT sell extra furnaces to third parties.

"To date, Apple has paid the Debtors $439 million and additionally spent in excess of $700 million in connection with the transaction despite receiving from the Debtors sapphire that was only a small fraction of the Debtors' original commitment," one document reads. "Far from the villain in these chapter 11 cases, Apple is the largest victim of the Debtors' failure to perform under the agreements it negotiated at arms' length and with advice of counsel."

Apple says it is still willing to work on a mutually beneficial agreement that might save jobs at the Mesa plant and "bring more sapphire to Apple's customers." GT has previously said it intends to exit sapphire production after concluding its deal; Apple has expressed a willingness to transfer Mesa operations to another firm, but cautions that it will only consider that after a 90-day review period during which it will "validate the viability of the Mesa facility to produce sapphire for Apple products."
     
I-ku-u
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Nov 7, 2014, 05:21 PM
 
is there any other interpretation of Squiller's affidavit (at least the parts quoted here) than "Apple bargained hard, and made demands to change the contract that, at least in hindsight, were clearly unreasonable. I agreed to the changes instead of holding them to the original terms"? 'Cause I don't see how any one could agree with him that his affidavit shows this is Apple's fault.
     
lockhartt
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Nov 7, 2014, 05:40 PM
 
Instead of bait-and-switch, perhaps Apple accurately assessed its risk factors vis-a-vis GT and opted to further protect itself from what was perceived as an increased likelihood of failure on GT's part.
     
Flying Meat
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Nov 7, 2014, 06:13 PM
 
"He says that Apple originally promised to buy sapphire furnaces for GT and let them operate them, but later demanded a "fundamentally different deal" in which Apple would only lend the furnaces and have no obligation to buy them,.."

Wait. If Apple didn't buy the furnaces, how can they "lend" them? The furnaces would not be Apple's to lend. Did they cosign a lease? Are they the only signer on the lease? What gives?

Throwing junk against the wall to see what sticks, I'm thinkin'.
     
Steve Wilkinson
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Nov 7, 2014, 06:23 PM
 
And, that explains why he aggressively sold off stock? Yea, this is a guy who's testimony I'm going to trust. (rolls eyes)
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Spheric Harlot
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Nov 8, 2014, 12:00 PM
 
It seems like they didn't walk away from a deal they should have walked away from, as they couldn't live up to its terms and knew it going in.
     
rfrmac
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Nov 8, 2014, 02:03 PM
 
I can't see what Apple had to gain out of this if things went wrong. As for the furnaces, if the deal was not in your best interest, why take it. Through your mismanagement, it messed up your company as well as Apple.
     
Atheist
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Nov 10, 2014, 08:19 AM
 
I would suggest that GT felt Apple was so committed to sapphire glass that they wouldn't let GT fail. They were obviously wrong.
     
davoud
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Nov 10, 2014, 01:37 PM
 
"GT says Apple pulled 'bait-and-switch' in newly unsealed documents"

Bzzzzt! "GT says in newly unsealed documents that Apple pulled bait-and-switch." The bait-and-switch was not in the documents, but was revealed in the documents.
     
   
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