GT Seeks to Void 'Oppressive and Burdensome' Agreements With Apple, Outlines Sapphire Wind Down Process

[NT1440]

Apple is a bully and arrogant. They're like the guy yelling at the gate agent at an airport, "Do you know who I am?!"
Like businesses should kiss their feet because it's a big contract.

....

They spent over $300 million to equip these guys, build the plant, secure the negotiations with the state, then GT clearly has nowhere near the production capacity needed.

This plant was set to double the entire worlds production output of sapphire slugs, they clearly have gotten nowhere near the promises they made.

How is that being a bully?

 

[brand]

Apple is a bully and arrogant. They're like the guy yelling at the gate agent at an airport, "Do you know who I am?!"
Like businesses should kiss their feet because it's a big contract.

So you have been a business partner with Apple before? I thought not. You have no idea what its like to do business with Apple.

 

[Keirasplace]

Apple is a bully and arrogant. They're like the guy yelling at the gate agent at an airport, "Do you know who I am?!"
Like businesses should kiss their feet because it's a big contract.

Well, frack, don't sign the contract then.

They also took a BIG FAT LOAN from Apple and then weren't able to deliver on god damn contract; is that Apple's fault too? Should they have held their hands too?

Apple is probably better off with them out of their supply chain. Now, they just need to try to get some value back from those hacks.

 

[cfedu]

All the reports were yield was too low... so yah

Was that bad yields From GT or a 3rd party that apple hired? From what I understand GT supplied sapphire boules. I think the bad yields were from a 3rd party.

 

[fredfnord]

You sound like you support the people who buy overpriced homes during the peak of market when they were insanely priced. And then the economic downturn came, they lost their jobs and could no longer pay for their overpriced homes. If everything was signed as a legal contract, how was that the Bank's fault?

*sigh* Not that I'm likely to persuade Solomani, who has clearly settled on a parable for the 2007 crash that fits snugly into his worldview with no protruding corners, but...

We don't expect regular non-lawyer human beings to understand the terms of contracts. That's what lawyers are for. If you sign a 300-page mortgage contract, do you understand it? No, you don't. Hell, you probably don't even if you're a lawyer, unless you wrote it or are in the process of a legal dispute involving it. Understanding a contract involves many read-throughs, notes taken, references consulted. In the average mortgage contract there are literally dozens of examples of provisions which are invalidated by state or federal law. Do you know which ones those are? (Hell, my apartment lease, a four-page document, is about 1/10 invalid under California law. Do you know why?)

Home buyers bought homes that they thought they could afford, on terms that they didn't understand. They couldn't afford to spend $2000 for a lawyer to analyze the contract even in brief... that's WHY they were doing 0% down mortgages and so forth.

You are welcome to expect everyone in the country to only sign agreements they understand, but... oh, wait, are you using a piece of software now? I bet you haven't read the shrink-wrap license for it. And even if you did, I bet you didn't understand it. Do you have a credit card? I bet you didn't know that you probably have signed away your right to sue the credit card company in the event that they use your 'autopay' bank account to take $40,000 out and close your credit card. Now you have to go to an arbitrator, some of whom find for the company in over 95% of cases. (And courts have ruled that 'blatantly incorrect' or 'patently ridiculous' interpretations of the law on the part of arbitrators cannot be challenged in court, because you agreed to abide by the decision of the arbitrator even if it is completely wrong.)

The home buyers are foolish for buying expensive houses that they could not afford, that were above their means. They did not plan to be able to afford that house if they were laid off for a few months, had no reserves.

And here we come to the crux of the matter. "I have and have always had plenty of money, and am so privileged I am literally incapable of imagining what it might be like to be someone who isn't EXACTLY LIKE ME."

And, in particular, "If you can't get laid off and still make your house payments for at least half a year you have no business owning a house." I guess we can extend that: if you get laid off and can't still pay your rent for an entire year, you have no business signing a one-year lease." Or just "Poor people are all morally inferior to me, because otherwise they wouldn't be poor." It's a moral clarity only available to those between 11 and 15, and those whose moral development has never progressed further than that.

 

[Zinthar]

In this case, GTAT would have met contractual obligations but Apple returned sapphire due to an upstream issue and put it on hold. In the meantime, GTAT can only sit on it because the agreement was that they could only sell to Apple... so they sit on it while incurring all the employment and manufacturing costs.

True, if the events occurred as Margolis speculated, and if the contract was written as such. But that sounds suspect for two reasons:

1) Could GTAT's managers and lawyers really be stupid enough to sign a contract like that?
2) Would Apple even want to sign a contract like that when failure could mean bad PR from the loss of American jobs in the AZ plant? Wouldn't Apple have let GTAT out of the exclusive purchase part of the deal at the point when Apple rejected the sapphire? You'd normally want to increase the global supply of a material to decrease manufacturing prices, while also avoiding antagonizing a supplier unnecessarily.

 

[CWallace]

For those suggestion that the Chinese could not properly machine the sapphire into a usable product and therefore Apple forced GTAT to eat the sapphire they already made, I have a few issues with that:

1) Apple have said they worked to help GTAT stay in business by deferring repayments. Forcing them to eat that sapphire is counter to this plan, especially considering Apple could easily eat that cost themselves and keep GTAT in business.

2) If GTAT delivered product to spec and the Chinese suppliers couldn't work it, then Apple could not return the sapphire to GTAT and void their payments for said sapphire without being at risk of being in breach of contract. Apple could have either exerted legal/financial pressure on the Chinese suppliers who couldn't deliver finished product or, if they didn't want to risk those contracts, Apple would have had to eat the costs themselves and still paid GTAT for the sapphire they delivered.

3) GTAT has asked the court to allow them to keep their sapphire plants running until the latest batch of sapphire is completed because they view that sapphire as a salable asset. If they can sell that final batch of sapphire currently in production, they could sell all the sapphire Apple is said to have returned to them.

 

[sentiblue]

OMG... it's so sad to know almost 900 people will lose their jobs...

A good portion of them probably gave up their previous job for this one in hopes that their stock options will one day change their lives and they could offer a better living to their children...

I would expect Apple to be a bit more talkative at this time... at least let people know if it's willing to help GT further, or continue withholding the remaining $139M.

 

[shk718]

Both Apple and GTAT are to blame for this but mostly Apple. Apple loves to offload technical and financial risk onto other parties and did that to the fullest here. GTAT got onboard, betting on the upside of having Apple as a partner and a stable future revenue stream. If GTAT's products meet spec and third parties encounter difficulties, that's not on GTAT - it's Apple's responsibility. Then, Apple, with the deepest pockets, pulls the rug from under GTAT and acts surprised when the business with the shallowest pockets and wholly dependent on this arrangement (which Apple deliberately created) is screwed.

Moral of the story - don't do business with Apple, as they set their contracts so that their screw ups can take you down. Not exactly great for their reputation.

WRONG- the moral of the story is don't say you can do something you can't. if Apple started selling phones with screens that shatter easily who are you, as a consumer, going to blame GT or Apple? - Apple of course - not GT - you're going to ask Apple why they used an inferior product - they should have tested it first - well guess what - they did - and it was. Clearly we don't know all the details here - but I bet anything this is what happened.

 

[Keirasplace]

Very interesting hypothesis. Is it based on something you read and can you post a link? I would like to read more about this angle.

You think they loaned a company 500 million to build furnaces and what not without being sure it actually works in a phone?

Doesn't seem likely. The proof of concept on small scales undoubtably worked or they wouldn'T even have tried to do this.

It is scaling it up to high volumes and keeping the quality up while keeping to a tight schedule that seemingly failed.

This was a huge gamble and they lost (or maybe even Apple lost, unless they're retreiving most of the equipment).

 

[CausticPuppy]

Looks like they're chafing under the agreement and have been unable to keep afloat, maybe if apple used them for the iPhone 6, this wouldn't have been an issue.

And maybe if they had been able to meet their production commitments, Apple would have used them for the iPhone 6.

 

[old-wiz]

Why did they even sign the *** contracts in the first place? Did Apple hold a gun to the executives' head?

 

[k1121j]

To Funny

Perhaps Gt should not have entered in to a contract they could not handle.. Stick it to them for being greedy and putting the company in jeopardy accepting the contract

 

[Boatboy24]

My popcorn is ready...

 

[businezguy]

Wrong. 1) Not winding down is continually burning cash. 2) Morality and business are not entirely separate - that's why the justice system has such involvement in business affairs like this.

1) I don't see how a company that isn't operational could be "continually burning cash". Perhaps that's your point, I don't know.

2) The only way I could care less about the whole business vs. morality argument would be to become a corpse. I'll leave business philosophy to business philosophers and ignore their discussions in the washroom.

The main point is, a company should not be allowed to conduct business in the fashion GTA is attempting to. In the end, I hope management regrets their attempt to pull this off, because it is wrong either pragmatically and/or morally.

 

[HobeSoundDarryl]

What kind of morons and ********s sign an oppressive and burdensome contract...? Those who signed such a contract shouldn't be in charge of so many jobs and careers...

Maybe it wasn't oppressive & burdensome going in but became that way during the engagement. What's the marriage statistic? About 50% of marriages end in divorce. In the divorce and afterward, both parties often have some pretty terrible things to say about their ex. However, going into the marriage, the view of each other is just the opposite.

This is the about the 5th thread on this topic. As always, each is packed with the usual sentiment against the party that is not Apple. The most common rationale spun is that the CEO sold stock which obviously makes him guilty. Of course, Apple execs are selling Apple stock like crazy but that's "normal". One exec selling all of his stock has spun "best product pipeline in 25 years". Why sell stock if it's the best product pipeline? Why not hold it a little longer and take advantage of the extra gains on the strength of that pipeline reveal?

Yes, I know- it IS normal for executives to sell stock in their company and there's nothing wrong with Apple execs selling their Apple stock. But, the same should apply to this GT CEO selling some GT stock. Instead, we want to spin conspiracy against the player that is not Apple and that sounds so good we'll just keep spinning it.

A few days ago we read that Apple was supposed to give the company something like $139M dollars but chose to withhold it. If you had a relatively small company who might be depending on that $139M cash infusion and your client withheld it, that might indeed be called "burdensome". Going forward without an infusion of that much cash would likely be quite the burden... especially if you were locked into some kind of exclusive relationship that somewhat tied your hands as to what else you could do (as has been implied since). If that's the case, such exclusivity might be called "oppressive"- a great big company with such a tight hold on a small company that the small company has no good options but the one it's taking.

None of us know for sure but if judgement was passed on collective sentiment, it seems the non-Apple player would already be tarred, feathered, whipped, hung and toasted. Meanwhile the Pope should be awarding sainthood on the first corporate entity in history because they could certainly have nothing to do with anything bad happening here.

Some amount of facts will eventually come out. I suspect it's not nearly as one-sided as the sentiment in these threads would imply.

 

[divideby]

True, if the events occurred as Margolis speculated, and if the contract was written as such. But that sounds suspect for two reasons:

1) Could GTAT's managers and lawyers really be stupid enough to sign a contract like that?
2) Would Apple even want to sign a contract like that when failure could mean bad PR from the loss of American jobs in the AZ plant? Wouldn't Apple have let GTAT out of the exclusive purchase part of the deal at the point when Apple rejected the sapphire? You'd normally want to increase the global supply of a material to decrease manufacturing prices, while also avoiding antagonizing a supplier unnecessarily.

On the flipside, what say does GTAT have in the business decisions at Apple?

I don't think GTAT could secure a contract with Apple that says "You must buy this amount of sapphire from me for use in the iPhone 6."

That would basically lock Apple into producing iPhone 6 with sapphire, which I don't think Apple would ever want to be in that position.

At the end of the day, Apple wants to make the go / no go call on sapphire, and that is something GTAT wouldn't ever be able to secure in a contract, IMO. It is just the risk of the business.

 

[UnfetteredMind]

And for those of you who want to read the 10-k (page 57) it can be located here: annual report

Thanks for the link, interesting read so far.

 

[doctor-don]

One would have to believe this GTAT company had legal representation when the contract was negotiated and signed.

Due to problems with the people in China who were unable to machine the sapphire as required, much of it had to be returned to the original factory.

They are the ones who were responsible for GTAT not being able to fulfill the contract in a timely manner (for inclusion in iPhone 6). Maybe they, not Apple, should be the defendants in a lawsuit brought by GTAT.

 

[MellowFuzz]

Maybe it wasn't oppressive & burdensome going in but became that way during the engagement. What's the marriage statistic? About 50% of marriages end in divorce. In the divorce and afterward, both parties often have some pretty terrible things to say about their ex. However, going into the marriage, the view of each other is just the opposite.

This is the about the 5th thread on this topic. As always, each is packed with the usual sentiment against the party that is not Apple. The most common rationale spun is that the CEO sold stock which obviously makes him guilty. Of course, Apple execs are selling Apple stock like crazy but that's "normal". One exec selling all of his stock has spun "best product pipeline in 25 years". Why sell stock if it's the best product pipeline? Why not hold it a little longer and take advantage of the extra gains on the strength of that pipeline reveal?

Yes, I know- it IS normal for executives to sell stock in their company and there's nothing wrong with Apple execs selling their Apple stock. But, the same should apply to this GT CEO selling some GT stock. Instead, we want to spin conspiracy against the player that is not Apple and that sounds so good we'll just keep spinning it.

A few days ago we read that Apple was supposed to give the company something like $139M dollars but chose to withhold it. If you had a relatively small company who might be depending on that $139M cash infusion and your client withheld it, that might indeed be called "burdensome". Going forward without an infusion of that much cash would likely be quite the burden... especially if you were locked into some kind of exclusive relationship that somewhat tied your hands as to what else you could do (as has been implied since). If that's the case, such exclusivity might be called "oppressive"- a great big company with such a tight hold on a small company that the small company has no good options but the one it's taking.

None of us know for sure but if judgement was passed on collective sentiment, it seems the non-Apple player would already be tarred, feathered, whipped, hung and toasted. Meanwhile the Pope should be awarding sainthood on the first corporate entity in history because they could certainly have nothing to do with anything bad happening here.

Some amount of facts will eventually come out. I suspect it's not nearly as one-sided as the sentiment in these threads would imply.

Thank you, for carefully and diligently calling out the absurd fanboy-ism that exists on these comment boards.

 

[CWallace]

Yes, I know. It IS normal for executives to sell stock in their company and there's nothing wrong with Apple execs selling their Apple stock. But, the same should apply to this GT CEO selling some GT stock. Instead, we want to spin conspiracy against the player that is not Apple and that sounds so good we'll just keep spinning it.

For me, the timing of the bankruptcy filing vis-a-vis the stock sale is what draws my attention. I understand that the transaction date of the sale was set well before the bankruptcy filing, but that the CEO proceeded with the sale knowing that he would then shortly file for bankruptcy, while a prudent financial decision, was not really a prudent public relations decision (and may not have been a prudent legal decision as I fully expect a shareholder lawsuit over it and perhaps an SEC investigation depending on how the rules cover such moves).

 

[wxman2003]

GTAT-gate.

 

[hybrid_x]

So, to sum up there is no loan. There is a prepayment agreement secured by physical and equity assets. Apple has minimal exposure here. If it all goes bonkers Apple owns the GTAT subsidiary that runs the Arizona plant (including any inventory they may have) plus gets some $$$ from GT Equipment Holdings

And for those of you who want to read the 10-k (page 57) it can be located here: annual report

Excellent post. All drama aside, it seems GT wants to get out of the sapphire manufacturing business and go back to just making the furnaces. Apple will get the sapphire manufacturing operation, and GT can go back to their core competency.

 

[Mactendo]

Shame on Apple. That sapphire craze was a stupid thing from the beginning. Gorilla glass is stronger and better suited for iPhones.

 

[divideby]

For those suggestion that the Chinese could not properly machine the sapphire into a usable product and therefore Apple forced GTAT to eat the sapphire they already made, I have a few issues with that:

1) Apple have said they worked to help GTAT stay in business by deferring repayments. Forcing them to eat that sapphire is counter to this plan, especially considering Apple could easily eat that cost themselves and keep GTAT in business.

Deferring repayment is fine. But if no one is buying any Sapphire, how are they going to maintain operations and pay people? Then again, if no one is buying sapphire, why are you going to maintain operations?

2) If GTAT delivered product to spec and the Chinese suppliers couldn't work it, then Apple could not return the sapphire to GTAT and void their payments for said sapphire without being at risk of being in breach of contract. Apple could have either exerted legal/financial pressure on the Chinese suppliers who couldn't deliver finished product or, if they didn't want to risk those contracts, Apple would have had to eat the costs themselves and still paid GTAT for the sapphire they delivered.

They are probably at risk for breach of contract, which is why GTAT reserves the right to make future claims against Apple, as noted in this article posted today.

3) GTAT has asked the court to allow them to keep their sapphire plants running until the latest batch of sapphire is completed because they view that sapphire as a salable asset. If they can sell that final batch of sapphire currently in production, they could sell all the sapphire Apple is said to have returned to them.

The completion of this last batch of sapphire could help with the restructuring as opposed to just pulling the plug. They are in the business (lol) of preserving value and not necessarily just liquidating.

Just my two cents.