Chivas Products Ltd. has received a boost from automakers in its effort to avoid bankruptcy liquidation.
General Motors Corp. and Chrysler Corp. jointly have agreed to loan Chivas as much as $3 million, more than double the $1.4 million the automakers previously had pledged, according to an order filed last week in the Chivas Chapter 11 reorganization.
The additional financing from GM and Chrysler, which are attempting to increase participation by minority suppliers in the auto industry, is expected to help Chivas, but it is still unknown if Chivas can obtain all the capital it needs to win approval for its reorganization plan, due by Dec. 9.
GM will not support Chivas by itself, said Robert Weiss, a lawyer representing the giant automaker. ``There are a number of other constituencies other than GM, including Chivas' lenders, creditors and its other customers, who must also contribute to a successful reorganization,'' said Weiss, partner with the firm Honigman Miller Schwartz and Cohn of Detroit.
Jack Gibson Jr., a lawyer for Chivas' creditors, said reorganization is not moving as fast as the creditors would like. ``Whether they will be able to succeed is not known at this time,'' said Gibson, a shareholder in Kemp, Klein, Umphrey & Endelman P.C. of Troy.
Joseph Anderson Jr., chairman and chief executive officer of the Sterling Heights, Mich.-based manufacturer of plastic parts, last week told lawyers during a creditors' hearing that he was hopeful of assembling a reorganization plan.
He confirmed corporate cutbacks at Chivas that included the departure of several company vice presidents. In addition, a number of the 13 automobile leases the company has been funding will be eliminated, he said.
Anderson, a former General Motors executive, said little about the reorganization progress. He declined all comment to Crain's Detroit Business, a sister publication to Plastics News.
Chivas had assets of $29 million and debts of $39.7 million as of June 29. Anderson filed for bankruptcy protection Oct. 7. Chivas owes GM and Chrysler $900,000 each.
The promise of increased financial support for Chivas from the two automakers came as the company was expecting a $1.3 million shortfall for the month of October.
The automakers will advance Chivas new loans up to $3 million, which will be added to a revolving credit line created in September 1996 with Comerica Bank. The combined loan amount from Comerica and the automakers is $12.2 million, according to the order filed with U.S. Bankruptcy Court in Detroit.
GM and Chrysler are expected to continue maintaining parts-production volumes with Chivas through the 2002 model year. But that will require a reorganization plan acceptable to all parties.
Weiss, who heads Honigman Miller's bankruptcy practice, said GM has a strong interest in Chivas' reorganization. The automaker worked with Chivas before and after the bankruptcy filing, Weiss said, but ``GM cannot do it all by itself.''