Auto supplier Collins & Aikman Corp. entered Chapter 11 bankruptcy protection May 17, citing ``mounting liquidity issues,'' but maintained it is not going out of business, merely reorganizing in a move that will strengthen the business in the long run.
The company, which Plastics News ranks as North America's largest injection molder, long has been rumored to be near bankruptcy, but consistently defied predictions until its latest money issues surfaced.
On May 12, David Stockman stepped down as chairman, chief executive officer and president of the Troy, Mich.-based firm and Collins & Aikman admitted it had serious cash-flow problems. The combination of high debt, rising raw material costs, vehicle production cuts and the recent downgrading of customers Ford Motor Co. and General Motors Corp. - which altered rapid payment plans that had supported the company - had hit hard. The company had less than $15 million on hand on a day-to-day basis, and was facing more than $50 million due on interest payments for loans between June 30 and Aug. 15.
With its filing at the U.S. Bankruptcy Court in Detroit, C&A stated it lacked sufficient cash on hand to fund operations. It has received a promise of up to $300 million in debtor-in-possession financing from JPMorgan Chase & Co. that will supply the needed money, however, and operations ``will continue on a normal course of business.''
Collins & Aikman does nearly $4 billion in business annually, about $1.6 billion of it in injection molding. It supplies components for nearly every auto interior product except seating, with a product line that includes instrument panels, center consoles, door panels, flooring and trunk liners.
The company was quick to reassure customers, suppliers, employees and retirees that it is not going out of business.
``We do not anticipate that customers and suppliers will experience a change in the way we do business with them,'' acting CEO Charles Becker noted in a written statement on the filing. ``We have taken steps to make sure that suppliers get paid in full in the ordinary course of business for all goods and services after the filing date, and that customers will continue to receive the same ... products to which they are accustomed.''
In a letter to suppliers posted on the company Web site, however, the firm noted that bankruptcy court procedures do not allow the company to pay for goods and services delivered before the filing date.
``We regret any hardships this may cause,'' Becker stated in the letter.
Throughout C&A's notices and letters to customers, retirees and suppliers, Becker was quick to point out that the Chapter 11 process is for restructuring, not closure.
``Collins & Aikman is not going out of business,'' the company noted in bold on a statement posted on its Web site. ``We intend to use the Chapter 11 process to restore our liquidity, improve our balance sheet and restore our profitability.
``We expect to emerge from Chapter 11 as a stronger, more competitive company that is well- positioned for long-term success.''