Michigan-based injection molder Instaset Plastics Co. LLC has filed for bankruptcy in a bid to stay afloat long enough to be sold to an injection molding company on the west side of the state.
The automotive plastics supplier, whose sales have been hollowed out by a host of supply chain problems, is seeking bankruptcy protection under Subchapter V of Chapter 11, according to the petition in U.S. Bankruptcy Court in Detroit.
The company, which is based near New Baltimore in the northern Detroit suburbs, is running out of cash and aiming to secure another loan from a creditor to keep operations going until it is taken over by Holland-based Clarion Technologies Inc. The process, known as a 363 sale, is expected to be complete by Oct. 31.
"A potential disruption in services would be devastating to debtor's ability [to] perform on its executory contracts and to maximize the value of its assets and to successfully liquidate as a going concern," the petition said.
The company could not be reached for comment. Strobl Sharp PLLC, which is representing it in the bankruptcy case, did not return a request for comment.
The bankruptcy filing is the result of a half-dozen years of financial issues for the company, which supplies plastic parts, such as interior door handles, for OEMs including General Motors Co. and Ford Motor Co.
Since its peak in 2015, when the company was acquired by WGS Global Services, annual sales have declined more than 70 percent. Its sales this year totaled $4.9 million as of last week.
Like most automotive suppliers, Instaset's profitability has been hit over the past couple of years due to rising costs and challenges recouping losses from customers.
"In late 2021, debtor was unsuccessful in its customer requests for price increases in order to defray the impact of increased costs of labor and raw materials," the filing said.
The company's struggles precede the pandemic, however. It lost significant chunks of business in 2018 when GM announced the closure of its Lordstown, Ohio, plant and when an explosion at the Meridian Magnesium Products of America Plant in Eaton Rapids stopped production of the Ford F-150, halting deliveries from the truck's supply chain.
Just as operations began to stabilize, the company said, the pandemic shutdown reversed its progress. In May 2021, the company was acquired by Christopher Goetz.
"The cumulative effect of labor and supply chain shortages along with increases in raw material costs has burdened [Instaset] with substantial debt and no adequate means to generate revenue sufficient to continue to meet customer requirements," according to the petition.
Subchapter V is an increasingly popular way for smaller businesses to restructure. Filing for Subchapter V is less costly and time consuming than a traditional Chapter 11 filing, making it an attractive option for companies lacking liquidity and in need of a quicker solution, such as Instaset's case.
According to the filing, Instaset's assets total $1.3 million, with just $9,974 cash on hand. It owes Huntington Bank $557,311, and it owes WGS $692,745.
The company agreed to a sale to Clarion for $250,000, according to the petition. Additionally, the company struck a deal for an $800,000 loan from WGS to allow it to continue business and keep 50 workers on payroll until assets are transferred to Clarion.
"Without the authority to use cash collateral, the debtor will not have working capital needed to operate, pay employees, or maintain operations necessary to protect the bankruptcy estate," the petition said.
Clarion Technologies has plants at its headquarters operation in Holland and in Greenville, Mich. Plastics News estimates its 2021 sales at $65 million.