Power Electronics

Cabot Sues for Alleged Breach of Tantalum Supply Agreements

Cabot Corp., Boston, sued KEMET Corp. and Vishay Intertechnology Inc. in the Superior Court of the Commonwealth of Massachusetts (Suffolk Co. Civil Action No. 02-1585-BLS), alleging that KEMET and Vishay and/or their subsidiaries have breached agreements for the supply by Cabot to the two companies of tantalum powder and wire.

Cabot supplies tantalum to KEMET and Vishay for use in the manufacture of their tantalum capacitors. The December 2000 agreement between Cabot and KEMET requires the subsidiary to purchase and Cabot to sell certain specified amounts of tantalum powder and tantalum wire in the years 2001 through 2003 and tantalum ore in 2001 and 2002. The supply agreement specifies a variety of tantalum powder and wire products and their associated year-by-year prices per pound. The July and November 2000 agreements between Cabot and Vishay require the subsidiary to purchase and Cabot to sell certain minimum amounts of tantalum powder and tantalum wire in the years 2001 through 2005. The July agreement specifies a variety of tantalum powder and wire products and their associated year-by-year prices per pound, while the November agreement does not identify the particular product mix but does specify an average price per pound for all purchases.

Kennett F. Burnes, Cabot’s chairman and CEO, commented that the company tried to resolve “certain issues under supply contracts with two of our tantalum customers. To date we have been unable to reach mutual resolution with them and, accordingly, in early April we filed legal actions to enforce the contracts. Cabot does not take lightly suing its customers but is committed to doing what is necessary in this instance to enforce our rights under the contracts, to preserve their value for our shareholders and to be fair to our tantalum customers who are honoring their contracts. The ongoing litigation prevents the company from commenting further, other than to say that Cabot strongly believes that the purchase contracts are valid and that its rights ultimately will be upheld. Cabot’s tantalum business earned $14 million in operating profit this quarter, which was $12 million less than the same quarter last year. This decline essentially resulted from the failure of two customers to buy under the contracts at issue in the lawsuits.”

Commenting on the complaint, Dr. Felix Zandman, Vishay’s chairman and chief executive officer, stated: “While we have not yet had an opportunity to fully analyze the allegations of Cabot’s complaint, Vishay believes that its subsidiary that is a party to the Cabot agreements has sound defenses to all of the claims raised in the complaint and has complied fully with its obligations under the agreements, as Vishay believes they should be properly interpreted. Accordingly, the Vishay parties to the litigation intend to vigorously contest the action and to explore all rights and remedies available to them under the agreements and by law.”

Dr. Zandman added: “We understand that Cabot has commenced similar actions against other manufacturers of tantalum capacitors and that these manufacturers also intend to contest Cabot’s allegations.” Also commenting on the complaint, David E. Maguire, KEMET’s chairman, president, and CEO stated, “We are still reviewing Cabot’s complaint. KEMET denies any liability under the supply agreement and intends to defend itself vigorously. KEMET will exercise all of its rights and remedies afforded by law.”

To learn more about the case, visit www.cabot-corp.com, www.vishay.com, and www.kemet.com.

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