Officials at bankrupt Boyds Wheels Inc. said Monday they have shut down the custom wheel maker's manufacturing operations, dismissed about 130 workers, and will ask the federal Bankruptcy Court this morning for permission to auction its assets, including the company's name and its designs.
A profitable subsidiary, Hot Rods by Boyd--one of the world's leading custom hot rod builders--will continue operating while the parent company's financial advisors seek a buyer that would keep it intact.
Both companies filed for Chapter 11 bankruptcy reorganization on Jan. 30 after Boyds Wheels, its credit line frozen by its banker after a year of financial turmoil, ran out of cash.
David Asher, Boyds Wheels president, said Monday that the company hoped to find a job placement firm that will work with employees--most of them production workers--as they seek new jobs.
While employees were given their pink slips Friday afternoon at a meeting, the action caught few by surprise. Employees said rumors about an impending closure had been circulating for weeks.
The company was undone by an expensive, problem-plagued expansion of its wheel making operations in 1996. It struggled to turn itself around last year--hiring a new management team, firing 170 of the company's 350 employees and ultimately ousting founder Boyd Coddington as chairman and chief executive officer in November.
Chip Foose, design director at the 14-employee hot rod unit, helped develop the company over the past seven years. "It saddens me very much to see all of this go," he said. "The relationships we built with the other employees, to see them all go, doesn't make anybody happy."
Foose said he is certain that the current management team did what it could to keep the business going.
But Coddington, who shoulders the blame for getting the company into financial trouble, said in a brief interview Monday that he doesn't believe the shutdown had to happen. "I don't think they moved fast enough to do the things they had to do," he said.
Asher disagrees: "Our objective came to downsizing the operation as rapidly as possible and looking at securing new business. Unfortunately, we ran out of time to do both."
Coddington, a renowned hot rod designer and builder, started Boyds Wheels in 1988 as an in-house supplier to his hot rod business because he didn't like any of the custom wheels he was buying from outside vendors. Demand for "Boyd's wheels" grew and the company's sales soon overshadowed Coddington's custom car business.
He took Boyds Wheels public in 1995 at $6.25 a share. The stock price surged to a high of $16.63 in November 1996, the same year revenue hit a record $27.9 million.
That explosive growth led Coddington to pump more than $15 million--most of the company's cash and the bulk of its bank credit--into an expansion that doubled the size and capacity of its wheel manufacturing operation.
The company's woes began late in 1996 when a critical piece of new equipment malfunctioned, forcing it to scrap hundreds of orders and delay shipments to customers.
By early last year it also became apparent that the market for custom wheels had softened as auto manufacturers increasingly equipped vehicles with fancy wheels at the factory.
Boyds, which offers some of the priciest products in the $740 million specialty wheel market, was hit hard. Revenue plummeted to $16 million last year, and the company racked up $7.5 million in losses by the end of the third quarter--the last period for which financial results have been reported.
The company's stock, which has fallen steadily, closed Monday at $1.28, down 3 cents a share, on the Nasdaq market.
Asher, a manufacturing industry specialist brought in last summer to orchestrate a turnaround, said the company had only $500,000 in cash and no bank credit when he was hired.
The plan to liquidate Boyds Wheels' assets was developed over the past month and approved late last week by the company's directors. Asher said they took the action "to protect the collateral of the bank creditors and the investors."
A crew of 45 employees was kept on to complete production and shipping of pending orders, Asher said. That process should take about 45 days.
Asher has fielded several inquiries from businesses interested in acquiring various pieces of the operation. He said Monday he should have more information about potential deals "in two to four weeks."
It is unlikely, he said, that any single buyer would be interested in acquiring the entire operation--which includes 156,000 square feet of manufacturing, warehouse and office buildings spread out on 14 acres in the city of Stanton.
The size of the operation made it one of Stanton's largest employers. City officials said they were concerned about the loss of jobs and the future of the 11-acre manufacturing complex on Cerritos Avenue if the operation is moved out of town by a new owner.
Employees at Hot Rods by Boyd said they were relieved that the company wants to keep their profitable operation alive while seeking a buyer.
On Friday, employees in the hot rod shop "were nervous all day" when it became apparent that the parent company was closing and firing most of its employees, said Ralph Kirby, a 64-year-old Hawaiian Gardens resident who has worked in the shop for four years. "There's been rumors forever."
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Boyds Wheels Calls It Quits Boyds Wheels, hit by four consecutive quarters of losses, will shut its manufacturing operations. A quick look at the company and its troubled financial record:
Sales (in millions)
Net income (in millions)
Source: Bloomberg News
Key Events in Boyds Wheels' History
1988: Founded by Boyd Coddington
1995: Launches initial public offering of stock, priced at $6.25
1996: Sales soar to record $27.9 million, stock price follows, hitting high of $16.63 in November; Coddington launches several new products, doubles size of manufacturing facility 1997
* February: Company warns 1996 profit was lower than expected despite record sales, partly because of manufacturing problems
* June: With sales and stock price falling, company hires manufacturing specialist David Asher as president to orchestrate a turnaround
* October: Major customer files for bankruptcy, owes Boyds $465,000
* November: Coddington resigns as chairman, CEO
Jan. 30: Files plan for bankruptcy reorganization
March 2: Announces it will halt wheel manufacturing operations and sell all assets
Source: Times reports