GT Advanced COO: Apple Used ‘Bait and Switch’ Tactic

News Source: 
Bloomberg.com

Apple Inc. (AAPL) used “bait-and-switch” tactics in negotiating a contract with sapphire-maker GT Advanced Technologies Inc. (GTATQ), guaranteeing itself “heads I win, tails you lose” terms, a GT executive said in an unsealed court document.

Papers made public today showed how GT Advanced and Apple clashed on who was at fault for the failure of a billion-dollar synthetic sapphire project that led to GT’s bankruptcy last month in Manchester, New Hampshire.

Daniel Squiller, chief operating officer of GT Advanced, blamed the company’s losses on Apple, with which it had a supply agreement, in a bankruptcy court declaration.

“With a classic bait-and-switch strategy, Apple presented GTAT with an onerous and massively one-sided deal in the fall of 2013," the executive wrote. “When GTAT’s management expressed obvious concerns to Apple regarding the deal terms during the contract negotiations, Apple responded that similar terms are required for other Apple suppliers and that GTAT should ‘Put on your big boy pants and accept the agreement.’”

Apple originally offered to buy 2,600 sapphire growing furnaces, which would have been the largest order for the supplier, the executive said.

Apple countered that it “committed to put at risk up to $2 billion in connection with this project” and that it bent over backward to work with GT Advanced. Apple made payments even when the GT Advanced failed to meet deadlines, lawyers for the computer company wrote.

Final Days

The companies also disagreed on what happened on the days immediately before the bankruptcy.

Apple knew GT Advanced was running out of cash and didn’t offer anything that “solved the economic issues in an effective manner,” Squiller said in another document.

Apple contended it offered the supplier “significant concessions” that included accelerating much of the $139 million balance due under a prepayment agreement.

GT Advanced, which makes the synthetic sapphire used in smartphone screens, was forced into the role of “captive supplier” for Apple, Squiller said in the declaration explaining the company’s insolvency, a document routinely filed with a bankruptcy petition.

The document unsealed today was a supplement to the publicly available declaration.

Both sides argued to keep the original and other court papers under seal. They failed to persuade U.S. Bankruptcy Judge Henry Boroff.

Apple: ‘Untrue, Irrelevant’

Apple’s lawyer John M. Sullivan said in a court filing that Squiller’s account contained “numerous statements about Apple that Apple believes to be untrue, irrelevant and defamatory.”

He said the declaration “goes far beyond what was reasonably necessary,” and includes “gratuitous characterizations of Apple’s motives, negotiating tactics and business practices” spiced with “colorful rhetoric.”

The case is In re GT Advanced Technologies Inc., 14-11916, U.S. Bankruptcy Court, District of New Hampshire (Manchester).

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