Chivas Products Ltd., under pressure from General Motors Corp. and Chrysler Corp., is preparing to sell its assets and liquidate.
The Plymouth, Mich.-based Automotive Systems Group of Johnson Controls Inc. is believed to be a prospective asset buyer, according to unsecured creditors.
Chivas, a Sterling Heights, Mich.-based supplier of interior plastic trim and lighting components, has continued to operate its business at a substantial loss since June; it filed for protection under Chapter 11 of the U.S. Bankruptcy Code in October.
A Feb. 3 motion seeking an extension to file a plan of reorganization said the automakers will continue to fund Chivas' operating losses for a short period to allow the sale of assets.
Chivas expects to file a plan of liquidation after its asset sale has been completed. A purchaser could be approved as early as this week, according to the document.
Joseph Anderson Jr., Chivas chairman and majority shareholder, said he is looking at several options. He declined to elaborate, citing ``the sensitive state of negotiations.''
Chivas expects a contested hearing on its planned asset sale because of the treatment of several interested parties, including the Detroit Investment Fund and some shareholders, according to the document. The Detroit Investment Fund, a for-profit fund designed to provide limited financing to Detroit companies, is a secured creditor owed $2.5 million.
Some of Chivas' unsecured creditors, which are owed $8.9 million by the supplier, also are not happy. The asset sale is not likely to generate enough money to repay secured or unsecured creditors.
Unsecured creditors are concerned that the company's investment bankers have not had sufficient time to attract enough bidders to obtain the maximum sale price, said Mike Ratz, an executive with automotive supplier Brooklyn Products Inc., an unsecured creditor based in Brooklyn, Mich.
``That may not be in the best interests of the creditors if there is no bidding,'' he said.
Chivas, with sales last year of $47 million, is facing substantial claims, according to its bankruptcy filing. The company listed assets of $29 million and debts of $39.7 million as of June 29, in its voluntary Chapter 11 filing last October.
Prior to the bankruptcy filing, Chivas had planned to be part of a joint venture with the JCI Automotive Systems Group. That venture was awarded a $900 million contract for interior automotive parts for model-year 2000 vehicles, the largest ever awarded by GM to a minority-owned company.
The joint venture was to build a $5 million plant in Detroit's empowerment zone. The GM contract is to build unspecified interior components.
Jeff Steiner, marketing director for JCI's automotive group, said, ``We are committed to moving forward with a minority joint venture in Detroit's empowerment zone that meets our commitment made to GM.''
Production is set for the summer of 1999.