DETROIT - Mexican Industries in Michigan Inc. has closed the bulk of its plants and filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Meanwhile, union officials representing more than 1,000 employees filed a federal civil suit against the firm's owners, claiming they diverted $7 million worth of funds to themselves.
The Detroit-based company posted more than $170 million in sales in 1999. The firm injection molds, vacuum forms and does assembly of a variety of auto parts, ranging from steering wheel covers to instrument panels. The company filed for protection June 25 in U.S. Bankruptcy Court in Detroit.
Starting earlier this year the firm faced a series of problems: civil suits claiming it failed to pay debts, the departure of its chief executive officer and its struggle to continue operations. Mexican Industries officials decided June 8 to ``wind down'' the business operations effective June 11, it stated.
``Over the last year, the company's financial condition deteriorated greatly, and its customer base eroded. As a result, the company explored numerous ways to reorganize or recapitalize,'' the firm said in a June 25 news release. ``Despite the good faith, sincere and diligent efforts of the company's owners, employees, labor union, customers and suppliers, Mexican Industries was unsuccessful in finding a timely solution to its financial problems.''
The company has not filed full statement of its debts with the bankruptcy court. That data is due by July 10.
The firm plans to use Chapter 11 protection to ``provide for the orderly liquidation'' of its assets and also seek new investors to take over Mexican Industries' share in two joint ventures: Dos Manos Technologies LLC and Aguirre, Collins & Aikman Plastics Co. LLC.
The filing does not affect workers or production at the two ventures.
A day after Mexican Industries entered Chapter 11, United Auto Workers Local 600, which represents about 1,200 employees, filed a civil lawsuit against owners Pamela Aguirre, Robin Krych, Jill Aguirre and Rance Aguirre.
The four are the children of company founder Hank Aguirre, a former Detroit Tigers pitcher who started the company in 1979 to provide employment opportunities for the city's Hispanic residents. They took over Mexican Industries when Hank Aguirre died in 1994.
The bankruptcy prevents the union from seeking reparations from the firm, so it instead is taking action against the company owners, holding them personally liable for the losses.
The suit maintains the company did not uphold its part of its contract with workers, failing to pay health-care benefits and union dues. It goes on to note Mexican Industries closed plants without the federally required 60-day warning.
``[The owners,] having diverted corporate funds and assets to themselves, failed to adequately capitalize the corporation and otherwise used the corporation as an alter ego ... of themselves and as a device to defraud creditors and employees,'' it states.
The company had not paid its share of health-care premiums since April and also failed to pay the employees' share of those bills, although it had withheld the money from paychecks, the lawsuit continues.
Medical, dental and vision insurance providers canceled coverage retroactively once the business closed, said Local 600 President Jerry Sullivan. Some employees who thought they had insurance coverage now are being asked to pay the full cost for services they had, some of them back to the beginning of April.
``We had no idea that they were not paying those premiums,'' he said.
The company also was not paying union dues collected through paycheck deductions, he said. When the UAW questioned Mexican Industries, it was told the company was having some problems but was expecting to clear those shortly and would make good on the money.
``We were willing to work with them,'' Sullivan said. ``The most important thing is to keep [the company] open and keeping people working.''
The suit also seeks the 60 days' worth of wages and benefits employees would have been entitled to under the federal Worker Adjustment and Retraining Notification Act.