French automotive supplier Valeo SA has filed Chapter 11 bankruptcy for its North American branch of Valeo Electrical Systems Inc., saying it had to reorganize the operation to restore its financial health.
VESI of Rochester, N.Y., includes injection molding for the company's production of automotive wiper and airflow systems, motors and other automotive components.
A slowing auto industry, leading to a loss of $70 million this year for VESI, prompted the Dec. 14 filing at U.S. Bankruptcy Court in New York, the company said in a news release.
``The recent industry sales lift from `zero percent' deals hasn't changed things,'' the news release stated. ``VESI is losing money on so many of its products that producing more of them, with even higher overtime costs, only makes matters worse.''
But Automotive News, a sister publication of Plastics News, reported in June that Valeo was considering a Chapter 11 filing to rid itself of a difficult union situation in Rochester.
The Valeo unit admitted it had reached an impasse with the more than 2,000 members of Local 509 of the International Union of Electrical Workers, stating that ``repeated efforts'' to negotiate changes to the contract did not result in the changes needed to survive in its existing form.
``If VESI gets the economics right, there can be a solid future in it, a future in which it can build upon existing core businesses, win new programs and broaden its customer base,'' the company stated. ``To get there, VESI will need to become leaner, more efficient and achieve significant savings in its union contract. Chapter 11 gives VESI the framework to focus on that future.''
Those sacrifices will include ``significant downsizing of its work force'' and lower contract costs, the firm reported.
The plant is a former General Motors Corp. operation, and employees there had an expensive contract that carried over through two changes in ownership on its way to Valeo, the company has maintained.
The firm will continue manufacturing and will make its employee and supplier payments, but said the process will require sacrifices.
The Paris-based automotive supplier has dropped hints about problems in Rochester all year, In March, Chairman Thierry Morin noted that ``to eliminate the main loss-making operations, we will be tackling head on priority issues such as our Rochester plant in the United States.''
Valeo is among the 10 largest global automotive suppliers, with 61 percent of its nearly $8.6 billion in 2000 sales in Europe and another 29 percent in North America.