Ohio supplier seeks court approval to cancel GM contracts

Automotive News | March 4, 2009 – 1:03 pm EST

 

Ohio supplier seeks court approval to cancel GM contracts
 

CLEVELAND (Reuters) — Aluminum supplier Aleris International Inc., which filed for Chapter 11 bankruptcy last month, has sought approval from a U.S. bankruptcy court to reject four purchase contracts with General Motors, saying it was "very concerned" about the extended payment terms in the contracts.

In a motion filed late last week, the suburban Cleveland company said its subsidiary, Alchem Aluminum Inc., was supposed to start shipping certain aluminum and silicon products to GM from March 1, 2009.

"Given GM’s public pronouncements about the current state of their finances and the widely known difficulties facing the automobile industry, the debtors (Aleris) are very concerned about the extended terms set forth in the contracts," the filing said.

Aleris added that it was not even sure if GM would be able to pay for the materials on the due date and the cost of preparing the shipment had created an economic risk that was not justified by the benefits of the contract.

The decision to reject the contract is a sound exercise of business judgment, it said. Under U.S. bankruptcy rules, a bankrupt company can reject executory contracts, such as this, subject to court approval.

Aleris, which makes aluminum rolled products and is owned by an affiliate of private equity firm TPG, filed for Chapter 11 bankruptcy protection in Wilmington, Del., in February citing decreased demand for aluminum amid a downturn and a heavy debt load.

Headquartered in Beachwood, Ohio, Aleris operates over 40 plants in North America, Europe, South America and Asia, and has about 8,400 employees.

According to its Web site, the company, created in 2004, makes aluminum rolled and extruded products, recycled aluminum, and specification alloy products

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