Tuesday, May 17, 2005

Collins & Aikman files for bankruptcy

Troy-based auto supplier plans to continue operating with $300 million financing plan

By Dee-Ann Durbin / AP Auto Writer

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DETROIT - Auto supplier Collins & Aikman Corp. filed for bankruptcy Tuesday, saying the filing will help it get immediate cash to fund its business operations. The company said it will continue to operate during bankruptcy proceedings.

Collins & Aikman, based in Troy, is one of the largest U.S. auto suppliers, with total sales of $3.9 billion last year. It provides automotive flooring, fabric and instrument panels to all the Big Three automakers as well as Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.

In conjunction with the filing, Collins & Aikman said it has received a commitment from JPMorgan Chase & Co. for up to $300 million in debtor-in-possession financing. Collins & Aikman said that with court approval, the financing deal will allow it to meet its supplier obligations as well as employee salaries and benefits.

Charles Becker, who became acting chief executive last week after former chairman and CEO David Stockman resigned, said day-to-day operations will continue throughout bankruptcy proceedings. Stockman is a former Republican congressman who served as White House budget director during Ronald Reagan's first term.

"We do not anticipate that customers and suppliers will experience a change in the way we do business with them," Becker said.

The bankruptcy filing was widely expected for the troubled supplier, which has been struggling with the high cost of steel and other raw materials and production cuts at General Motors Corp. and Ford Motor Co. When Stockman resigned Thursday, Collins & Aikman said it was seeking a waiver from creditors because of lower-than-expected first-quarter results. The company has not yet released those results.

The New York Stock Exchange delisted Collins & Aikman's shares on Thursday, citing the company's financial uncertainty. The shares closed at 78 cents on Wednesday.

Collins & Aikman's shares were worth about $6 last summer but have sunk since the company announced it was investigating accounting problems and said it likely would have to restate earnings for 2003 and 2004, reducing results for both periods.

As of last week, Collins & Aikman had $13.4 million in cash available under its financing arrangements. The company's total debt is around $2 billion, according to Standard & Poor's Ratings Services, which downgraded Collins & Aikman's debt further into "junk" status last week.

Collins & Aikman is the latest Michigan-based supplier to declare bankruptcy. Tower Automotive Inc. filed in February, while another giant supplier, Federal-Mogul Corp., declared bankruptcy in 2001.

Collins & Aikman has 23,000 employees in 17 countries. None of the company's affiliates outside the United States were included in the filing.

Collins & Aikman, http://www.collinsaikman.com