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Apple, GT Settlement Threatened By Ruling To Unseal Documents

Some details of what caused Apple Inc.’s sapphire glass supplier to go bankrupt, shut down its Mesa facility and lay off hundreds of employees within the past month were finally laid out this week in an edited statement by one of the supplier’s top executives.

On Thursday, a bankruptcy court judge ruled to unseal the unedited version of that statement, which could happen next week. But doing so could erode the settlement agreement between Apple and GT Advanced Technologies Inc. that was proposed last week and thus threatens GT’s ability to reorganize.

The edited statement, filed Tuesday by GT’s Chief Operating Officer Daniel Squiller, provided the first publicly available details on the lopsided deal with Apple and what drove GT into bankruptcy on Oct. 6. Such details had previously been under seal due to confidentiality agreements, which is extremely unusual in such legal proceedings.

Last week’s settlement allowed Squiller to reveal some specifics of why the relationship soured in the edited statement.

However, the unedited statement that U.S. Bankruptcy Judge Henry Boroff wants unsealed includes more scathing insight, based on Squiller’s personal opinions, into Apple’s treatment of GT and smaller companies in general.

Apple’s attorney argued in court that the unedited version contains “inflammatory language” and “name calling” and that unsealing it could damage the company’s reputation and other business relationships.

The public version of Squiller’s statement already puts Apple in a negative light.

Squiller described the risky $578 million contract with Apple signed last November as “an ambitious transaction for the production of sapphire in quantities, size and quality never before achieved.”

If they pulled it off, he said it would’ve been “revolutionary” for GT and a “significant achievement” for the tech giant.

The tradeoff, however, was agreeing to contract terms that left GT with almost all of the risk and Apple with almost all control, Squiller said.

GT had to follow a strict and fast timeline for producing the glass in unprecedented volume, size and quality and do so exclusively for Apple. Otherwise, it faced hundreds of thousands of dollars in fines for each hiccup.

Apple, on the other hand, made no exclusivity agreements to GT and it didn’t even have to purchase the material it was requiring GT to produce.

Those lopsided terms, among others, strained the relationship from the beginning when the Mesa facility ran into construction delays and several power interruptions. For GT, it was “critical lost time” and caused it to fall behind schedule.

At the same time, GT ran into quality issues with the glass and it was forced to hire more employees and buy new equipment at its own expense. That drove up production costs, which cut into its profits, and it couldn’t renegotiate pricing with Apple.

“To date, (GT) has incurred approximately $900 million in costs in connection with the Apple project (of which $439 million was funded by the Apple prepayment) and, if the pricing set forth in the Apple Agreements could not be renegotiated, (GT) would never realize a profit,” Squiller said.

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Kristena Hansen was a reporting at KJZZ from 2014 to 2015.