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February 25, 2008 01:00 AM

New ownership closing in on Blackhawk

Rhoda Miel
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    Blackhawk Automotive Plastics Inc. may be nearing its exit from Chapter 11 bankruptcy protection under a new owner, but the future is not as clear for other automotive suppliers.

    It is not easy to predict who might be interested in investing in the auto plastics supply base at this point, said Tim Dumond, a director with consulting firm Grant Thornton LLP. Even high-risk players are being cautious.

    ``There are some bargains, but the equity funds are learning right now that just because something is a bargain it doesn't mean it's a value,'' he said. ``The price is irrelevant compared to the work involved.''

    Injection molder Blackhawk of Salem, Ohio, received about 15 written offers for its assets in a sale led by W.Y. Campbell & Co. in Detroit. It has selected fellow auto supplier Flex-N-Gate Corp. as the lead bidder for a March 5 auction.

    Flex-N-Gate, based in Urbana, Ill., already has set a purchase price of nearly $20.8 million for Blackhawk, which has annual sales of about $130 million. Other bidders must beat that price by at least $500,000, at auction, to win out over Flex-N-Gate.

    ``The bidding has been very, very robust,'' said Cliff Croley, Blackhawk president and chief executive officer, in a Feb. 20 telephone interview. ``We're very happy with how well things have gone, but obviously we would have liked some more value.''

    Blackhawk employs nearly 1,600 at plants in Salem and Mason, Ohio, and a sales office in Troy, Mich. It molds functional interior parts, including air ducts. It filed for Chapter 11 in U.S. Bankruptcy Court in Youngstown, Ohio, in October, citing rising costs and slowed production by its customers.

    Flex-N-Gate is a privately owned auto supplier that began as a metal specialist and expanded into plastics in 2001 when it purchased Ventra Group Inc. of Oakville, Ontario, a maker of bumper fascia and other exterior parts.

    ``Flex-N-Gate is interesting because of Blackhawk being primarily interior and they've been primarily exterior,'' Dumond said. ``It's an interesting play, but how it all fits together is beyond me right now.''

    Blackhawk is getting action that others are not.

    Many potential buyers of auto parts suppliers have backed off in recent months as conditions have worsened. The slowdown in the housing industry, a credit crunch, slowing vehicle sales and higher resin prices have scared away some investors.

    ``It's been predominantly really high-risk equity funds that have been looking,'' said Jim Gillette, director of supplier analysis for CSM Worldwide of Novi, Mich.

    Some firms still are on the lookout for small companies that can be fixed, he said, but the bigger the company, the fewer the options to find buyers. Even overseas investors from China and India that had been looking for opportunities to expand into North America have been quiet, he said.

    ``There isn't the funding available for big firms,'' Gillette said.

    That could mean problems for a company like Plastech Engineered Products Inc., which makes $1.5 billion worth of plastic parts for the auto industry. The company filed for Chapter 11 protection in U.S. Bankruptcy Court in Detroit on Feb. 1.

    It could also make funding more difficult for Blue Water Plastics Inc., a $200 million injection molder of auto parts, which filed for Chapter 11 protection with the Detroit court on Feb. 12.

    The focus of discussions about Dearborn, Mich.-based Plastech has been its ongoing struggle with customer Chrysler LLC of Auburn Hills, Mich., which wants to take possession of its tools and send the work to other suppliers.

    On Feb. 19, Judge Phillip Shefferly ruled that while Chrysler still owns the molds, moving them out of Plastech at this time would create too much damage for the molder, making it impossible for the company to continue in business. For now, Plastech is continuing to make parts for Chrysler and other customers.

    What's uncertain, both Gillette and Dumond said, is who will be available to provide the funding Plastech will need to finance its exit from Chapter 11.

    Just two years ago, there was interest in the auto supplier sector by major financial investors. Wilbur Ross, who made a name by finding money in the steel industry, created International Automotive Components Group by buying up parts of other suppliers, including the interiors unit of Lear Corp. and plants once run by the former Collins & Aikman Corp.

    Financier Ira Rennert, through his Renco Group Inc., is working to complete a purchase of Delphi Corp.'s interiors operations. Carl Icahn made a failed bid to buy the seating group of Lear.

    But there have not been any hints of interest yet from those players for something the size of Plastech - although it is early in the process.

    ``For these plastics guys, it's not going to be getting any easier to find money going forward,'' Dumond said.

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