Automotive Supplier Contech Files for Bankruptcy

Automotive parts manufacturer Contech, L.L.C. has filed a bankruptcy petition, seeking creditor protection for its domestic subsidiaries. The Michigan company says the Chapter 11 filing will allow it to overcome “significant debt obligations, sell certain non-core operations and address the unprecedented low volumes in the North American automotive industry by rationalizing its operational cost structure.” Chairman and CEO Morris Rowlett pointed to “significantly reduced production levels at our largest (automotive) customers” for the company’s unmanageable debt. The company's Steel Products Group division produces cold and warm forged products and near-net shape forgings. Contech also produces and machines nonferrous diecastings, as well as some tubular products, for suspension and exhaust systems. It’s not clear which Contech operations may be sold, nor what assets may be “rationalized.” The bankruptcy petition was made in consultation with Contech’s customers, suggesting the reorganization process may be expedited. Rowlett said the company intends to complete the bankruptcy proceedings this year, with “a significantly improved balance sheet and greater operating flexibility.” In April 2007, Marathon Automotive Group acquired Contech from SPX Corp. for approximately $146 million. Marathon Automotive was formed by an investment group, Marathon Asset Management, to acquire suppliers to the automotive and truck industries. According to its statement about the filing, Contech is conducting normal business operations and it expects to meet its obligations to employees, suppliers, and other creditors. It anticipates no interruption to its business, and that the Chapter 11 filing should not impact day-to-day operations. Contech said it is discussing interim financing with its lenders and key customers, which together with normal cash flow would fund ongoing operations. “This action is an integral part of our ongoing efforts to restructure Contech and meet the challenges of the automotive industry going forward. We continue to work closely with our lenders and customers to reach a consensus on the remaining changes that are necessary,” Rowlett stated.