Wednesday, February 2, 2005

Tower Automotive files for bankruptcy

By Dee-Ann Durbin / Associated Press

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DETROIT -- Auto parts supplier Tower Automotive Inc., under pressure from lower auto production volume and high steel prices, filed for bankruptcy protection from its creditors Wednesday as part of a debt restructuring effort, the company said.

Tower, which makes auto body structures and suspension components for every major automaker, said the filing would help it reorganize its debt while continuing normal business operations.

In documents filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York, Tower reported $787.9 million in assets and $1.3 billion in debts. Trading of Tower stock was suspended on Wall Street Wednesday morning, the company said.

Tower is one of many auto suppliers feeling the squeeze from automakers, who are demanding lower prices to offset incentives and other costs in a highly competitive market. At the same time, suppliers are expecting no relief in the coming year in the high price of steel and other raw materials.

Tower President and CEO Kathleen Ligocki said the company also was hurt by the termination of early-pay programs by major automakers. The programs, established in 2001, allowed automakers to pay suppliers early for products and therefore get a discount. Now that the programs are ending, Tower found itself millions of dollars in debt.

Tower has projected around $3 billion in revenues in 2004. Ligocki said the outlook for 2005 is good, with $1.4 billion in new business and a diverse product mix.

Tower has more than 12,000 employees. The company's operations in Europe, Asia, Brazil and Canada aren't affected by the reorganization.

In conjunction with its filing, Tower said it has arranged commitments for up to $725 million in financing, subject to court approval.

"The financing, combined with our normal cash flow, should be more than adequate to enable Tower to continue normal business operations throughout this process," Ligocki said.

Tower shares last traded at 77 cents before trading was suspended Wednesday. The stock has traded in a 52-week range of 55 cents to $6.94.

On the Net: Tower Automotive: http://www.towerautomotive.com