Delphi Automotive Systems Corp. and Visteon Corp. have forced Loranger Manufacturing Corp. into bankruptcy and have won court action to require the Warren, Pa., processor to continue producing parts for the firms.
The two automotive supply giants, along with compounder Rodgers Engineering Corp., filed an involuntary Chapter 11 filing for Loranger on Nov. 19 at the U.S. Bankruptcy Court in Erie, Pa. A day later they sought an order compelling Loranger to continue making the parts needed to keep Delphi and Visteon plants running.
Loranger officials blamed two problems familiar to other automotive industry suppliers: reduced sales volume and constant pressure to cut prices.
``It's basically cost us millions of dollars over the years,'' President George P. Loranger said in a Jan. 4 telephone interview. ``It's been very difficult when you're a small company dealing with giants,'' he said. ``They put you into a corner.''
In their court filings, officials from Delphi and Visteon maintained that they, too, were forced into a corner, fearing they could face a shortage of parts needed to meet their own customers' demands.
Executives were not immediately available to comment on the proceedings, but Visteon officials discussed problems with its troubled supply base during a Nov. 30 conference call with industry analysts.
At that time, Chairman and Chief Executive Officer Peter Pestillo noted Visteon had recently stepped in under court supervision to take over production for one supplier ``to avoid disrupting consumer production.'' He did not identify the company involved in that action, but said it had occurred about a week earlier.
``We all have those about whom we're worried,'' he said. ``[We're doing] what we're doing to ensure we make it through whatever bad times are coming,'' he said.
Visteon activated a team within its purchasing department about six to eight months earlier to monitor troubled suppliers and work out potential solutions, Chief Financial Officer Dan Coulson noted on the call. The number of Visteon's troubled suppliers is increasing, he said, and the company must make certain its own supply chain is operating smoothly to meet commitments and pricing pressures from its customers.
An involuntary Chapter 11 filing requires action by three companies, which brought compounder Rodgers Engineering of Addison, Ill., into the mix. Only Delphi and Visteon have sought court backing to require continued manufacturing.
Operations are continuing in Pennsylvania and Loranger Manufacturing is working to restructure its operations and preserve jobs, Loranger said.
``We're a large employer in a small town in Pennsylvania,'' he said. ``Keeping those jobs has been one of my main concerns through this.''
The complicated legal procedure also brought on a series of personnel issues, including appointment of an interim CEO and a reduction in George Loranger's involvement in the restructuring.
Loranger Manufacturing opened in 1950. It now has about 650 employees - 400 of them at the home base in Warren, plus a major international base in Szekesfehervar, Hungary. The company announced plans for a Monterrey, Mexico, operation last year. The Chapter 11 filing involves only the U.S. holdings, with manufacturing in Warren and Starbrick, Pa.
Its operations include injection molding, gas assist injection molding, blow molding, thermoset injection molding and compression molding and its in-house mold-making shop. The firm listed $60 million in injection molding sales in 2000. Its disputes with Troy, Mich.-based Delphi and Visteon of Dearborn, Mich. - the two largest global automotive suppliers - involve mostly under-the-hood components, Loranger said.
For years, Loranger Manufacturing has faced demands for price cuts from its customers. With North American auto production in decline throughout the past year, the company also had to deal with decreasing sales volume, Loranger said.
``I know several of my friends are facing the same situations,'' Loranger said.
Amy Wilson, a staff reporter for Plastics News sister publication Automotive News, contributed to this story.