Swedish auto supplier Plastal Holding AB has filed for bankruptcy, citing a severe liquidity crisis due to problems in both the auto industry and distressed financial markets.
Though the filing at district court in MÃ¶lndal, Sweden, affects parent firm Plastal Holding, President and CEO Roar Isaksen said it is unavoidable that Plastal's operations in other countries will follow its lead.
We have turned over every possible stone in our attempt to avoid this situation, but today our last efforts failed, he said in a March 5 news release.
Majority shareholder Nordic Capital Fund V, put more cash into Plastal in January, but the size of the auto industry's decline a 40 percent manufacturing drop in the first two months of 2009 was too big to maintain.
Plastal, based in KungÃ¤lv, Sweden, employs 6,000 at 30 production facilities in 10 countries in Europe and China. The firm had sales of 1.3 billion euros ($1.9 billion) in 2008. It injection molds bumper fascia, interior and exterior auto parts, including door panels for the Smart minicar, made in Hambach, France. Plastal purchased German competitor Dynamit Nobel Kunststoff GmbH in 2005, more than doubling in size.
The court will appoint bankruptcy trustees for each Plastal group, the company said. Deliveries to its Swedish plants have been suspended, but parts will be shipped if customers can assume freight costs.
The drop in demand has been both unexpectedly sudden and large towards the end of last year, and continued in the beginning of this year, said Chairman Curt Germundsson. The consequences have been more severe than anyone could have predicted. The current market conditions continue to be extremely uncertain and it has therefore not been possible to find a sufficient long-term solution.
Plastal likely will not be the last European supplier forced into bankruptcy. While the European auto industry is in marginally better condition than its North American counterpart because of its wider range of automakers, it still is seeing large cutbacks.
It is a global industry, and [suppliers] are affected by everything that happens, said Antonio Ferreira with CSM Worldwide, a consultant group based in Byfleet, England.
While traditional auto firms in Italy, France or Germany may be financially stable, General Motors Corp. and Ford Motor Co. also have a huge presence in Europe and European suppliers to those carmakers are as tightly linked to them as North American suppliers.
Even this morning, I was talking to a supplier and he was watching the news minute by minute, trying to figure out what's going to happen to GM, said Ferreira, who is CSM forecast manager for European supply chain and technology. Everyone is saying the same thing: 'It's a storm, and we're trying to be proactive as we can and ride it out for as long as we can.'
Some specialty firms make technology or parts that are in demand, but the bulk of the suppliers are companies like Plastal and are in a very competitive field with little profit even when times are good, Ferreira said. Those businesses are taking the biggest hits. Even without the downturn there had to be some consolidation, he said.