Injection molder Mayco Plastics Inc. and its 500 employees will have a fresh start in the auto industry, under new ownership led by an automotive supplier creating his own second chance.
NJT Enterprises LLC, controlled by Larry Winget, is slated to buy Sterling Heights, Mich.-based Mayco for $5.5 million through the U.S. Bankruptcy Court in Detroit. Mayco had entered Chapter 11 protection in September, hoping for a quick sale while acknowledging it could be forced to close.
The sale, set for Oct. 23, comes a year and a half after Winget's previous company, Venture Industries LLC, was sold through its own bankruptcy process in Detroit. Venture was a global auto supplier with more than $1 billion in sales before it ran into problems when its German operation, Peguform GmbH, went into insolvency in 2002, cutting off any financial flow to parent Venture.
NJT's offer came as Mayco representatives were within an hour of a deadline to find a buyer or begin the process of closing shop.
Mayco already had sought bids from auction services to sell its equipment. The firm received six estimates, ranging from $750,000 to $3.4 million, Mayco lawyer Steve Gross said during an Oct. 16 hearing about the sale. The offer from NJT easily was the best alternative.
``This is in the best interest of the estate,'' Gross said. ``We view this as a win-win situation in terms of the customers, of the buyers, of the sellers, of the creditors and, most of all, for the employees.''
Mayco has lost some work in the past month, but NJT has deals pending that would bring in more than $40 million worth of annual business. The purchase includes provisions to retain the workforce under the terms of its existing labor contract for at least a few months.
At its height, Mayco had more than $80 million in sales. It also invested in technology and engineering and was a key player in a paint replacement program used on bumpers for some DaimlerChrysler Corp. Dodge Neon cars. The process, which combined thermoforming and injection molding, along with an ionomer film to replace the paint, never won widespread approval. The firm also had suffered from a slowdown in production within the auto industry that came even as costs increased.
Mayco injection molds parts for a variety of key contracts, including air-bag covers and other functional components, from its sole facility in Sterling Heights. The sale will allow production to continue uninterrupted, and without the cost of re-sourcing work to other companies, Gross said.
Mayco is far smaller than the former Venture holdings, but it will join other holdings that Winget retained control of through Venture's bankruptcy proceedings. He still has a molding operation in Australia, as well as proprietary engineering in North America.
Most of the former Venture facilities are under new ownership and operating as Troy, Mich.-based Cadence Innovation LLC.
For Winget, coming back will not be easy. Second chances are hard to come by in the auto industry, because there are a limited number of customers operating within a strained supply chain.
``One of the key elements for a supplier is to be considered reliable, responsible,'' said Jim Gillette, director of supplier analysis for CSM Worldwide, a Northville, Mich., consulting group.
Although Gillette was not familiar with the deal involving Mayco, most firms emerging from Chapter 11 must work hard to make sure customers can continue to count on them, he said.
Carmakers remember which companies have put their assembly plants at risk of shutting down, and those firms will pay, he said.
Ford Motor Co., for instance, is determining what action to take in response to Collins & Aikman Corp. halting shipments of interior trim parts to Ford's Hermosillo, Mexico, assembly plant. C&A's move was part of a pricing dispute. Ford was forced to stop production for one shift.
C&A has been operating under Chapter 11 protection since May 2005, but has stated it plans to emerge in 2007. Angering a key customer now could hurt its long-term plans, Gillette said.
``There are memories out there that last a long time,'' he said.
Customer relations are especially important now as automakers look to consolidate their supply base, said Mike Benson, with the investment banking division of Stout Risius Ross Advisors LLC. Make a mistake on delivery or quality, and they will remember.
``They're going to be more careful in sourcing [future] programs,'' said Benson, who heads SRR's automotive group in Detroit. ``That could put you at the back of the line.''
But that is not to say recovery is impossible. Key Plastics LLC went through a long and bitter bankruptcy process before emerging under new ownership in 2001. New owner Ewing Management Group opted to retain the firm's name despite harsh feelings toward it and focused on an aggressive effort to restructure.
``Every company purchased from Chapter 11 has had financial problems,'' Benson said. ``But you're better off looking for a company with bad finances and a good customer relationship if it's going to work.''