Plastech Engineered Products Inc.'s Chapter 11 bankruptcy filing is causing pain for many small mold-making shops that are owed millions of dollars by Plastech and don't know when, or if, they will get paid.
In Shelby Township, near Utica, Mich., Epic Equipment & Engineering has built tools and molds valued at about $1.2 million. But Epic isn't willing to ship them until the company receives assurances that Plastech is able to pay for them, said Epic Vice President Steve Wilkins. For Epic, $1.2 million is a large order, Wilkins said.
Still, Epic considers itself lucky. At one time, Plastech was among its largest customers.
``In the last couple of years we really scaled back the amount of work we did with them,'' Wilkins said.
Plastech blames lower production levels by automakers, increasing resin costs and a tougher competitive environment for its problems. It makes parts such as door panels, floor consoles and engine covers for Johnson Controls Inc., General Motors Corp., Ford Motor Co. and Chrysler LLC.
Plastech pays mold makers through its part approval production process. Under PAPP, Plastech does not pay for molds until it receives payment from the Big Three, a process that often takes six to 12 months, and in some cases longer.
``The difficult thing on our side is, we don't know when PAPP payment has occurred,'' Wilkins said. ``Two years ago we made a decision that we could only do a certain percentage of PAPP work.''
Epic, with about $12 million in 2007 sales, employs about 50. This year Wilkins said the company is expecting annual sales of between $15 million and $16 million.
Court documents show Plastech owes Epic about $450,000.
``It's not a mortal blow,'' Wilkins said. ``If it was a million, that might be a different story.''
At least eight of Plastech's 40 largest creditors are mold makers.
Plastech filed for Chapter 11 protection from creditors in U.S Bankruptcy Court in Detroit on Feb. 1 after Chrysler canceled all its contracts and demanded possession of its tools. Once in bankruptcy, Plastech fought to block Chrysler's effort.
On Feb. 19, Plastech prevailed.
Douglas Doran, Chrysler's director of interior procurement, said during court testimony earlier this month that Chrysler has paid for about $167 million worth of tools - stamping dies, injection molds, fixtures and other equipment - and acknowledged Plastech has an additional $13.4 million of equipment Chrysler has not paid for.
But because of the payment practices Plastech was following, industry professionals said it's possible Plastech did not forward payments received from its customers to the mold makers.
According to bankruptcy documents, Plastech owes J&J Tool & Mold Ltd. in Oldcastle, Ontario, about $1.1 million.
J&J Vice President Mike Altenhof said the actual amount is 20-30 percent higher. J&J has annual sales of about $5 million.
While the company is close to landing several new contracts, Plastech's lack of payment is a big problem.
``We count on them for quite a bit of work,'' Altenhof said. ``I've been scrambling and looking for some alternative work for a good three to four months.''
J&J also is struggling to win business due to the declining value of the U.S. dollar.