By JEWEL GOPWANI • FREE PRESS BUSINESS WRITER • July 13, 2009
In another example of how the auto industry’s sales drop-off has financially crippled auto suppliers, J.L. French Automotive Castings Inc., a maker of aluminum parts, filed for bankruptcy protection early today. It is the company’s second bankruptcy filing in three years.
Overburdened by debt, Wisconsin-based J.L. French, which counts on General Motors Co., Ford Motor Co., the Chrysler Group and Magna International Inc. for most of its sales, said it already has negotiated a plan to cut its secured debt by 75% that includes another trip through Chapter 11.
High levels of debt could push at least two other major suppliers into Chapter 11 in the next few weeks.
Bankruptcy fears sent shares of Detroit-based American Axle & Manufacturing Inc. down 27 cents or 15% on Monday to close at $1.52.
Last week the company said it won a waiver on the terms of its loan agreement through the end of the month.
Shelly Lombard, an analyst at Gimme Credit, which rates corporate bonds, said in a note to investors that it will be difficult for American Axle to avoid bankruptcy.
American Axle spokesman Chris Son said today that the supplier continues to work with law firm Shearman & Sterling, but declined to say if the company is preparing a bankruptcy filing.
Meanwhile, Novi-based Cooper Standard faces a deadline of Wednesday to cut its debt after it put off making an interest payment last month.
The supplier’s discussions with lenders continue, said Cooper-Standard spokeswoman Sharon Wenzle.
J.L. French, which makes such aluminum parts as engine blocks, oil pans and transmission cases, said plummeting revenue made it impossible for the company to keep up with its debt payments.
In a court filing, J.L. French CEO Thomas Musgrave said in recent years that the company “invested significant amounts of capital to expand” its “die-casting and machining capacity in support of specific customer production contracts that in many cases failed to generate the expected level of sales volume.”
With the company in financial stress from being over-leveraged, it has had a tough time convincing customers to award it new business.
Contact JEWEL GOPWANI : 313-223-4550 or jgopwani@freepress.com
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