If I make a shirt that uses a graphic that was on a different shirt, but that company no longer makes it, is it illegal?

Making a derivative work of a copyrighted artwork is the exclusive right of the copyright owners. It is perfectly legal for a copyright owner to sue to prevent ANYONE from making copies or derivative works of their art.

Yes

Just because the company is not currently producing a copyrighted graphic, this does not somehow give you license to do so.

I do not understand why you would think copyright works this way.

If you want to sell such shirts you will need to pay either company or the original artist for their work, depending on their arrangement was written.