Construction continues at Meridian Automotive Systems Inc.'s $28 million bumper fascia plant in Fowlerville, Mich., even as the company works its way through Chapter 11 reorganization.
Production also remains smooth throughout the Dearborn, Mich.-based auto supplier's 22 U.S. operations following Meridian's April 26 filing for protection with the U.S. Bankruptcy Court in Wilmington, Del.
``Meridian will continue to operate normally while it restructures its finances,'' said Chief Executive Officer Thomas Divird in an April 28 statement on the firm's activities.
The company has received $375 million in debtor-in-possession financing to continue normal operations.
The filing does not impact Meridian's facilities in Mexico, Canada and Brazil.
The company is the latest auto supplier taking refuge under Chapter 11 from an industry where its customers' market share is falling, raw material prices are increasing and automakers are demanding price decreases.
Those ``very difficult industry conditions'' with Meridian's $600 million in total debt combined to push the company over the edge, said Martin King, an analyst with New York rating agency Standard & Poor's.
``Industry conditions for automotive suppliers have deteriorated during the past year,'' King said.
So far, the hammer has fallen hardest on metal specialists that are battling increasing prices for steel. Since the last quarter of 2004, Tower Automotive Inc., Intermet Corp. and Oxford Automotive Inc. all entered bankruptcy protection, claiming steel price increases as at least part of the cause.
Meridian becomes one of the first major suppliers entering Chapter 11 that has added resin pricing problems to its woes with steel used in bumper beams and other structural parts.
The company injection molds bumper fascia and other interior and exterior components. Its composites operations take in both sheet molding compound and reaction injection molding. The firm has a high-profile placement on the new Honda Ridgeline truck, molding the SMC inner box with integrated storage for the pickup truck.
``Although some of the company's raw materials are purchased through customer resale programs that insulate it from cost increases, Meridian is exposed to market price fluctuations for a significant portion of its total material purchases,'' S&P's King said.
The overriding concern is Meridian's balance sheet, executives said.
``We need to reduce our debt and simplify our capital structure, in order to remain competitive under current market conditions,'' Divird said.
Lead equity owner Windward Capital Partners LP created Meridian through a series of acquisitions, starting with American Bumper & Manufacturing Co. in 1997 and following up with injection molder Lescoa Inc. and energy-absorbing foam maker Lorro Inc.
In 2000, it spent $363.1 million to buy the assets of composites specialist Cambridge Industries Inc. out of bankruptcy. The business aims at being a complete exterior specialist, capable of producing front and rear-end modules in addition to entire truck boxes.
A year ago, things were looking good enough that the equity partners withdrew a $60 million equity from the firm, without official objection. With the bankruptcy proceedings, however, the equity team may be forced to refund the money.
Crain's Detroit Business staff reporter Terry Kosdrosky contributed to this story.