Once-prominent injection molder Loranger Manufacturing Corp. officially closed its doors Aug. 30, but is asking to stay open a few more weeks to finish a project, said the trustee for the financially troubled company.
The company's free fall is a blow to the small town of Warren, Pa., where Loranger once employed close to 400 people before filing in November for Chapter 11 protection from creditors.
Only 50 workers remain at the facility, and that number will be cut to a skeleton crew of 15 for its final few weeks, said Mark DuMars, president of turnaround consulting firm Inglewood Associates Inc. of Mount Lebanon, Pa., and the Loranger trustee.
The closing has shaken other area molders, many of which knew Loranger as a well-run company in the hardscrabble automotive environment, and its president, George P. Loranger, as a savvy businessman who had the foresight to venture globally.
``It's a tragedy,'' said Hoop Roche, chairman and chief executive officer of Erie Plastics Inc., a nearby molder in Corry, Pa. ``Loranger is one of the older names. They were a pioneer in ISO 9000 and at the top of the heap, as far as I'm concerned, in quality and deliverables.''
But several automotive supply giants had other opinions. In November, major customers Delphi Automotive Systems Corp. and Visteon Corp. started involuntary bankruptcy proceedings against Loranger, after the company had difficulty paying bills.
The suppliers were concerned that Loranger would not meet demanding production schedules, according to court documents.
Delphi and Visteon helped keep Loranger afloat with loans for several months. A third company, thermoset compounder Rodgers Engineering Corp. of Addison, Ill., joined the suit but did not finance Loranger's operations. Officials at the three companies did not return telephone calls last week.
Loranger endured an agonizing year. Visteon pulled its work in February, and Delphi did the same at the end of April, DuMars said. About 10 prospective buyers for Loranger backed away when Delphi and Visteon left, he said.
Several other auto suppliers had expressed interest in working with Loranger, fueling hope that the company could be saved, he said. In the spring, an employee management group from Loranger started negotiations to buy the company, DuMars said.
But hopes were dashed again in June. Potential customers placed contracts with other suppliers that offered better prices or locations. Loranger scrapped plans to open a plant in Monterrey, Mexico.
``When customers decided to source production elsewhere, it took all the air out of the bag,'' DuMars said. ``We had to fold up. We tried hard but we couldn't get any offers.''
DuMars told employees in November that there was only a 5 percent chance of saving the company. Loranger has liabilities approaching $25 million and an accumulated deficit of about $10 million, DuMars said.
The company owes its large secured creditor, PNC Bank of Pittsburgh, close to $12 million, he said.
``When I arrived, the company was in chaos,'' DuMars said. ``They couldn't pay bills and had an adverse relationship with two major customers [Delphi and Visteon]. What I saw wasn't properly reflective of what the company might have been like in the past.''
In July, the bank and an unsecured creditors committee told Loranger to close Aug. 30. The company is asking the group to keep the doors open for several more weeks to finish a temporary project from Delphi, DuMars said. As of midday Aug. 30, no decision had been reached.
At least six auction companies have bid to sell off Loranger's assets, with a liquidation value estimated at about $3 million, DuMars said. The auction is expected to take place in December, he added. The entire Loranger operations will be sold. That includes the company's Starbrick, Pa., facility, which already has closed.
Loranger hopes to sell its sprawling international base in Székesfehérvar, Hungary, DuMars said. Sales in Hungary were valued at about $10 million to $12 million, DuMars said.
George Loranger had recruited other companies to lease space at that large industrial park, which Loranger had purchased with help from the Hungarian government.
Loranger Manufacturing's bankruptcy has been rancorous from the start. According to court documents, Delphi and Visteon worried that Loranger would not deliver parts on time due to its monetary distractions. But George Loranger argued that the suppliers themselves, by cutting profit margins to the bone, had forced the issue.
A series of court filings ensued, starting in U.S. Bankruptcy Court in Erie, Pa., and later moving to a similar court in Pittsburgh. Delphi and Visteon lawyers accused George Loranger of stubbornly refusing to disclose financial information and of thwarting court proceedings.
George Loranger was not available, and lawyers for creditors and Loranger Manufacturing did not return telephone calls.
George Loranger has filed a counterclaim against Delphi and Visteon alleging contract and pricing discrepancies. If Loranger wins that case, one creditor said the funds will be used to pay off the Loranger estate and potential creditors.
``It's all over [at Loranger] except the wrangling,'' said Gary Allizzeo, chief operating officer and general counsel with injection molder and creditor Sipco Molding Technologies of Meadville, Pa. ``Now the legal fireworks will start.''
Unsecured creditors do not expect to receive much from a Loranger sale, said Marlan Jones, president of Marlan Tool Inc. of Meadville, Pa., and a member of the unsecured creditors committee. ``We're just picking over the bones.''
Loranger recorded sales of about $45 million in 2000 and an estimated $37 million last year, DuMars said. At its peak, the company had about 650 workers.
After DuMars took over, several Loranger executives who had left the company returned briefly in an attempt to revive the molder, according to several sources. But those executives left again when it was clear the effort was failing, the sources said. ``They saw it was a losing battle,'' one said.
Several molders were chilled by news of the imminent closing.
``I can't believe how quickly they went from Chapter 11 to total liquidation,'' said the president of another molding company, who asked that his name not be used.
``We don't need to see this in the plastics industry.''
The Loranger saga also is a comment on the cutthroat automotive market, Roche said.
``The older, more established companies are at a competitive disadvantage,'' Roche said. ``The focus at Loranger has always been delivering value instead of merely driving out cost. Automotive companies have a more aggressive cost model and delivery controls, and that's a bad combination.''