Bankrupt US auto interiors supplier Collins & Aikman Corp late on Wednesday filed a reorganisation plan calling for its emergence from court protection as a stand-alone company.
The plan, filed with the US Bankruptcy Court for the Eastern District of Michigan, must still be approved by creditors and calls for emerging from Chapter 11 protection by the end of February.
Current stockholders would receive nothing under this plan, but some secured debt holders may receive stock in the reorganised company. The decision does not foreclose the possibility of a sale or merger at a later time for Southfield, Michigan-based Collins & Aikman, which filed for bankruptcy protection from creditors in the United States in May 2005, and in Europe weeks later.
"Through contributions from our creditors, customers and employees, we will improve our cost structure, strengthen our balance sheet and position C&A for long-term success," Chief Executive Frank Macher said in a statement early on Thursday. "The plan also provides us the flexibility to continue the M&A process as an alternative exit strategy."
Several US auto parts makers have filed for bankruptcy in the past two years under pressure from market share losses by US automakers that cut demand for parts, rising prices for raw materials such as steel and routine price cuts on long-term contracts that made business unprofitable.
Tower Automotive Inc and Delphi Corp filed for bankruptcy protection in 2005 and Dana Corp followed earlier in 2006. Collins & Aikman is the first of those larger parts makers to file a reorganisation plan. Collins & Aikman had been considering emerging either as a stand-alone business with an infusion of new equity, or through a sale or merger.
The company said in court documents that it had engaged in active negotiations with six interested parties on the sale of the company in whole or in part, in recent months, and continues to have discussions with undisclosed parties.
Financier Wilbur Ross has been among those publicly interested in Collins & Aikman under his plans to build auto parts companies focused on plastic interiors, metal parts and safety equipment such as airbags. Ross has acquired a large part of Collins & Aikman's European operations for his International Automotive Components Group. IAC also expects to acquire most of Lear Corp's European interior plastics business.
Collins & Aikman suffered under high debt loads from acquisitions and industry pressures and quickly burned through cash before and after its Chapter 11 filing, forcing its major automaker customers to step in and provide loans, tools and temporary price increases to maintain operations.
In April, the company announced plans to pull out of its automotive fabrics business and maintain a focus on injection-moulded interiors, carpeting and noise control products. It remains in discussions over the possible sale of its convertible tops business.
With the winding down of its fabrics business and the closure of other operations, Collins & Aikman will have just over 12,000 employees. Revenue projections were not available, but it had estimated annual revenue at about $2.5 billion in the past.
Collins & Aikman also has begun discussions with the Pension Benefit Guaranty Corp to terminate its pension plan and have restructured benefits for non-union retirees and also intends to negotiate changes to union retiree benefits.
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