Auto parts maker Contech files for bankruptcy
Automotive News | January 31, 2009 – 12:01 am EST
Auto parts maker Contech files for bankruptcy
DETROIT (Reuters) — Auto parts maker Contech LLC said on Friday that it has filed for Chapter 11 bankruptcy protection, citing a downturn in the automobile industry.
The company, which makes light-weight cast components for cars and trucks, plans to use the bankruptcy process to sell noncore operations, adjust operating costs and reduce its debt obligations.
The company said in a statement it is in discussions with its lenders and key customers to arrange interim financing.
Contech blamed the growing financial crisis besetting the auto industry.
“This action is an integral part of our ongoing efforts to restructure Contech and meet the challenges of the automotive industry going forward. We continue to work closely with our lenders and customers to reach a consensus on the remaining changes that are necessary,” CEO Morris Rowlett said in a statement.
“Over the past year, we have faced the same challenges many of our competitors and colleagues in the automotive industry have faced resulting from significantly reduced production levels at our largest customers.”
Contech is the second major auto supplier to file for protection this year. Eight companies filed for protection in 2008. So far this decade, at least 58 major U.S. suppliers have filed bankruptcy petitions, according to Automotive News research.
Contech said in court documents that sales had fallen nearly 30 percent in 2008 to $222.8 million from $312 million in 2007.
The company had been spun off from SPX Corp. and sold to Marathon Automotive Group, LLC, a company formed by Marathon Asset Management, LLC, for about $146 million in cash.
Contech is based in Portage, Mich., and filed its petition in Detroit.
PRESS RELEASE: CONTECH, LLC Enters Final Phase of Restructuring Effort
PORTAGE, Mich. – (Business Wire) CONTECH, LLC today announced that it and its domestic subsidiaries have voluntarily filed a petition under Chapter 11 of the U.S. Bankruptcy Code, commencing a reorganization proceeding. The filings were made today in the U.S. Bankruptcy Court for the Eastern District of Michigan. The move, which was made with the support of CONTECH’s key customers, will make it possible to relieve CONTECH’s strong underlying operations from significant debt obligations, sell certain non-core operations and address the unprecedented low volumes in the North American automotive industry by rationalizing its operational cost structure.
CONTECH is conducting normal business operations, and remains focused on serving its customers. In accordance with the Bankruptcy Code, suppliers are expected to be paid in full and under normal conditions for all goods and services provided after today’s filing.
CONTECH has filed various motions with the Bankruptcy Court designed to ensure that the company can continue to meet its obligations to its employees, suppliers and other creditors and ensure that there is no interruption in its business operations. Accordingly, the Company believes that the Chapter 11 filing should not impact its day-to-day operations.
To fund its continuing operations during the restructuring, CONTECH is in discussions with its lenders and key customers to arrange interim financing. We expect to conclude those negotiations shortly. Subject to Court approval, the Company intends to utilize such capital, in addition to cash flow from operations, to fund its operations during its Chapter 11 reorganization process.
“This action is an integral part of our ongoing efforts to restructure CONTECH and meet the challenges of the automotive industry going forward. We continue to work closely with our lenders and customers to reach a consensus on the remaining changes that are necessary,” said Morris Rowlett, Chairman & Chief Executive Officer of CONTECH, LLC.
“Over the past year, we have faced the same challenges many of our competitors and colleagues in the automotive industry have faced resulting from significantly reduced production levels at our largest customers.” Rowlett confirmed that the Company “expects to proceed quickly and intends to emerge from these proceedings this year with a significantly improved balance sheet and greater operating flexibility. During this period, we will work closely with our suppliers and customers to ensure their continued satisfaction. I am grateful for the steadfast support of our customers, suppliers, and of our employees throughout the entire process and I am confident in CONTECH’s strong fundamentals going forward.”
The company has engaged Huron Consulting Group and Paul Hastings as its financial and legal advisors, respectively, to help it through the bankruptcy process. Additional information about the case can be found at www.kccllc.net/CONTECH.
CONTECH is a market leading supplier of highly engineered, geometrically complex, light-weight cast component solutions for automotive OEM’s and Tier I suppliers. CONTECH also manufactures safety critical steel forged automotive components and steel tube fabrications through its Steel Products Group primarily for commercial truck OEM’s. CONTECH is headquartered in Portage, MI and has approximately 1,000 employees. The Chapter 11 filing affects only its U.S. companies. The company’s operations in the United Kingdom are not included in the Chapter 11 filing.