Microheat files for Chapter 11 protection

Robert Sherefkin
and David Barkholz

Automotive News | October 14, 2008 – 5:05 pm EST

DETROIT — Stung by a General Motors recall of its main product, Microheat Inc. today filed for Chapter 11 bankruptcy protection.

The once-promising technology company ceased most production of its hot-spray windshield washer at its sole manufacturing plant in suburban Detroit. Microheat is operating with a skeleton staff, including CEO Ron Gardhouse.

Microheat sought Chapter 11 protection as a result of an August recall of 944,000 GM vehicles equipped with Microheat’s HotShot system. The award-winning washer sprays hot liquid on windshields to clean the glass of ice and debris. GM recalled the vehicles, from the 2006-through-2008 model years, because of the potential for electrical fires.

As Automotive News first reported last week, GM wants Microheat to pay between $20 million and $25 million for the projected cost of the recall, according to court documents.

Last month, Microheat sued GM after the carmaker allegedly withheld payments for product shipped in July, August and September. Microheat says GM owes the supplier more than $3.7 million for the parts, tooling and other charges, according to court documents.

Microheat listed assets and liabilities of between $10 million and $50 million each, according to documents filed in U.S. Bankruptcy Court in Detroit.

By far the largest Microheat creditor is M-Heat Investors LLC, of Bettendorf, Iowa, with a claim of $42.7 million. About $10.1 million of the amount is secured and the remaining $32.6 million unsecured, according to the bankruptcy court records.

The GM recall affects more than a dozen of the automaker’s most expensive vehicles equipped with the hot-spray washer. The vehicles include the Cadillac Escalade SUV, Chevrolet Silverado pickup truck and Suburban SUV and Buick Enclave crossover.

In its recall notice, GM told the National Highway Traffic Safety Administration that a short circuit on the printed circuit board of the washer-fluid heater could overheat the control-circuit ground wire. To fix the problem free of charge, dealers will install a wire harness with an inline fuse, GM said.