Custom auto parts maker Boyds Wheels Inc., struggling for the past 10 months after a year of frantic growth, said Tuesday that a major customer has declared bankruptcy and left it with a $464,700 debt.
Separately, the company said its chief financial officer has resigned to take a new job and that his replacement has not yet been recruited.
The announcements shook investors and the Stanton-based company’s stock fell as much as $1.38 a share in a flurry of Nasdaq market activity Tuesday before climbing back to $3.06. The final price was off 81 cents from Monday’s close.
Boyds said it will set aside a reserve in its third quarter to cover the bills owed by Phoenix-based Super Shops Inc., an automotive performance parts chain that filed for Chapter 11 bankruptcy protection last month. The same bankruptcy left another major wheel maker, Cragar Industries Inc., also of Phoenix, with an unpaid bill for $3.53 million
“It will not be a good third quarter,” said David Asher, Boyds Wheels president.
Sources said the resignation of Rex Ours as Boyds’ chief financial officer was part of a management transition that began when Asher was hired in June. A manufacturing industry specialist, Asher has since hired several new managers who worked with him in previous companies. Ours was the only top officer remaining from pre-Asher days.
While profitable in the past, Boyds Wheels ran into trouble early this year after an expensive expansion that nearly doubled its manufacturing capacity. The company had relied largely on Coddington’s own marketing expertise and ran into an unexpectedly weak market with no formal plan of attack, analysts said.
On top of that, an equipment glitch forced the company to scrap tens of thousands of dollars’ worth of product and delayed deliveries to customers.
Sales, which had soared to $27.9 million in 1996, plummeted to just $7.9 million in the first half of 1997. The company posted a $1.2-million loss for the first quarter this year and a $4.1-million loss in the second quarter.
Boyds stock, which went public at $6.25 a share and was trading as high as $17.38 last November, has fallen into the $2 to $4 range in recent months.
Still, analysts aren’t writing off the company, which was founded in 1988 by custom hot rod maker Coddington and has an international reputation as a designer and manufacturer of high-quality aluminum wheels and customizing parts.
“They have a lot of hard work to do, but with the new president” should be able to turn things around, said Mark Robbins, an analyst with Red Chip Review in Portland. He described Asher as “a hands-on operating guy who is assembling a good [management] team.”
Asher said in an interview Tuesday that the company is being supported by customers and by the financial community “even though we are telling people that this will not be an instant turnaround. It will be well into next year before the numbers start looking better.”
The objective, Asher said, “is to have everything cleaned up by the end of the year. We need to get it all out into the open.”
Asher said the company has cut operating costs substantially in recent months and has developed a new line of wheel designs aimed at the fast-growing market for customized small and mid-sized European and Japanese automobiles like the Honda Civic and Volkswagen Golf.
The “Euro-Asian” sport market is a new one for the company, which traditionally has supplied customizers of domestic cars, larger imports, motorcycles and pickup trucks.