Plastech Engineered Products Inc. is making a play to buy bankrupt auto supplier Collins & Aikman Corp., but success for the $1 billion bid is far from a certainty.
Troy, Mich.-based C&A confirmed it has received a letter from competing injection molder Plastech, although C&A spokesman David Youngman would not disclose its contents. Plastech representatives did not respond to requests for comment.
C&A, which reported nearly $4 billion in sales last year, has about $2 billion in debt. It entered Chapter 11 protection in May.
C&A President and Chief Executive Officer Frank Macher said Plastech's bid ``doesn't cover the debt by any means.''
Macher said there has been plenty of interest in C&A, and he expects other bids. But it is impossible to tell what's going to happen until C&A delivers a business plan to the court by the end of August.
Even if the bankruptcy court opts to go forward with an auction of C&A's assets, the sale would be open to a wide variety of bidders, not just one company.
``[Plastech] hasn't even looked at the [C&A] books,'' said one person familiar with the proceedings. ``Any bid they'd make is a fabrication based on their best guess.''
Automakers and suppliers also have expressed concerns about Plastech, following its 2004 acquisition of injection molder LDM Technologies Inc.
Industry watchers are concerned that a play by Plastech to expand echoes too closely the rapid buildup and eventual financial problems at C&A itself.
Plastech had about $1 billion in sales last year and total debt of $472 million.
In July, ratings agency Standard & Poor's downgraded Plastech's credit ratings from B+ to BB- - three steps below investment grade - because of concerns about its debt and future business.
``They have not been immune from all of those challenges in the supplier sector,'' said analyst Nancy C. Messer.
``Clearly, the company has limited room for additional debt,'' Messer said. She also noted worries about its product mix moving forward. About 60 percent of Plastech's sales are to General Motors Corp. and Ford Motor Co., and both have seen their shares of the North American market decreasing.
In addition, about 60 percent of Plastech's business goes into parts for light trucks and sport utility vehicles, and those sales recently have seen a drop-off.
Plastech does have one trump card: its status as a minority supplier. Plastech is owned by Julie Nguyen Brown, an immigrant from Vietnam.
``I'm having a difficult time understanding the catch other than they're a qualified minority supplier,'' said Jim Gillette, director of supplier analysis for CSM Worldwide Inc. of Mountainside, N.J.
``They can go to the front of the line, but that doesn't keep you in business. This smacks of that whole rush in the 1990s - to get as big as possible in certain areas to be able to command better margins,'' Gillette said.
Terry Kosdrosky is a staff reporter for Crain's Detroit Business.