DETROIT — Two plastic-parts-making subsidiaries of JPE Inc. have filed for bankruptcy protection, representing another in a series of financial and management blows for the struggling automotive supplier.
On Sept. 15, JPE operating subsidiaries Plastic Trim Inc. of Dayton, Ohio, and Starboard Industries Inc. of East Tawas, Mich., filed separately for protection under Chapter 11 of the U.S. Bankruptcy Code.
Liabilities for each company were not broken out, but JPE's debt totals about $105.6 million owed to five banks, said Chief Operating Officer James Fahrner. Both companies have assets of less than $50 million, according to documents filed in U.S. Bankruptcy Court in Detroit.
PTI, purchased by JPE in 1995, extrudes and injection molds decorative exterior auto parts. Starboard, bought in 1994, coextrudes plastic and metal exterior parts.
PTI employs about 400, and Starboard has about 140 workers, Fahrner said.
The bankruptcy filing pounds another stake in the heart of a troubled company, said consultant Dennis Virag of Automotive Consulting Group Inc. in Ann Arbor, Mich. JPE founder and Chairman John Psarouthakis resigned Sept. 11 after creditors pressed JPE for debt repayment, Virag said.
``I think the company is in dire straits,'' Virag said. ``It's just a matter of time before [JPE] is split up and whatever of value is sold off. I don't believe that JPE as an entity will be around much longer.''
JPE announced in March it planned to sell its operations to retire debt. It will continue to explore that option, Fahrner said.
The supplier's JPE Canada Inc. subsidiary — operating two injection molding plants in Petersborough and Kitchener, Ontario — had drained JPE of working capital and forced the sale.
JPE had underestimated the Petersborough subsidiary's operating losses when it bought the business from Pebra Inc., rescuing it from bankruptcy protection in 1996, JPE Executive Vice President Donna Bacon said in March.
JPE Canada reported a $2.3 million net loss for the six months ended June 10 with sales of $113 million for that period, according to a Securities and Exchange Commission filing.
JPE historically has bought underperforming firms at a low price to try to revive them, Virag said. Psarouthakis bought JPE in 1990 after selling JP Industries Inc., a successful engine-parts business.
``[Psarouthakis'] expertise has always been in turning around underperforming companies,'' Virag said. ``He just ran into a different business environment now. Creditors aren't patient, customers aren't patient and they all want immediate results.''
The problems at Starboard and PTI stemmed from a bank group that would not provide the capital for normal production levels, Fahrner said. JPE had paid down its debt load this summer to the banks during the prolonged General Motors Corp. strike, he said.
After the strike ended July 28, the banks did not return to the previous financing level, he said.
``The plants weren't performing at a level that could cover debt,'' Fahrner said. ``It gets to the point where banks don't want to throw more money at what they see as a bad situation. They brought in the rope.''
Bankruptcy protection helped JPE find alternate financing to keep the plants operating while it reorganized its bank debt, Fahrner said. The plants will continue normal production — primarily serving GM and Chrysler Corp. — with debtor-in-possession funding from GMAC Business Credit, a venture of GM and an unnamed minority investor. Terms of the agreement were not disclosed.
Unless it files for an extension, JPE has 120 days from the Sept. 15 filing date to come up with a debt reorganization plan.
JPE had tumbled financially this summer. It lost about $4.2 million in sales because of the union strike against GM, according to an SEC filing.
JPE also announced a $4.5 million write-off on losses for its JPE Canada subsidiary for second-quarter earnings, which were released Aug. 14.
Nine days earlier, JPE was delisted from Nasdaq for poor stock performance. At the time, the stock, still traded over the counter, was selling at 50 cents a share, down from $8.25, its 12-month high on Oct. 13. The stock traded at 75 cents a share at the close of business Sept. 17.
Comerica Bank officials, JPE's largest secured creditors, declined comment.
JPE also owes $1.8 million to custom compounder Lynn Plastics Corp. of Lynn, Mass., according to the filing. Officials at Lynn, PTI's largest unsecured creditor, also declined comment.
Bacon, now president and chief executive officer, will run JPE. Psarouthakis' exit came 12 months after the resignation of Executive Vice President C. William Mercurio, whom sources considered instrumental in guiding PTI and its operations to health.
JPE also operates lug nut supplier Industrial & Automotive Fasteners Inc. of Royal Oak, Mich., and Dayton Parts Inc., an aftermarket parts supplier in Harrisburg, Pa. JPE recorded 1997 sales of $287 million with a net loss of $2.14 million. Comparatively, it ended 1996 with sales of $201 million and a $1.58 million loss.