Chrysler Group said that it sued German automaker Daimler alleging a breach of an agreement to provide diesel engines to the Detroit carmaker after it emerged from bankruptcy.

A complaint filed in US bankruptcy court in New York cited 'Daimler's willful refusal to honor its obligations under contracts assumed by Old Chrysler and assigned to the new Chrysler."

Chrysler Group said that Daimler was seeking to extort Chrysler Group into paying for costs for a diesel engine that Daimler agreed to forego a few months ago and claimed this was a breach of its obligation to negotiate in good faith.

The Detroit group said in a statement that "Rather than present those issues to the bankruptcy court as agreed, Daimler has refused to execute final agreements covering the supply of key parts unless Chrysler accedes to its demands."

Chrysler emerged from bankruptcy under an alliance with Italy's Fiat and backed by the administration of US President Mr Barack Obama and the Canadian government that acquired the assets of the Old Chrysler, which had once been a unit of the German firm.

In 2007, Daimler sold an 80% stake in Chrysler to the private equity firm Cerberus, ending a marriage of nearly 10 years. The German firm renounced its remaining stake in Chrysler ahead of the company's bankruptcy filing in May.

(Sourced from AFP)