Dura Automotive seeks bankruptcy protection
Dura Automotive Systems Inc. filed for bankruptcy protection Monday, becoming the fifth major U.S. auto parts company since February 2005 to seek protection from creditors.
Dura, a maker of parking brakes, door hinges, seat recliners and other parts, listed liabilities of $1.73 billion and assets of $1.99 billion in papers filed with U.S. Bankruptcy Court in Wilmington, Del.
The company, based in Rochester Hills, Mich., said it was forced to file for Chapter 11 protection because of North American production cutbacks by U.S. automakers and rising costs for raw materials such as steel.
Dura’s largest customers, Ford Motor Co. and General Motors Corp., are building fewer vehicles in the U.S. as they lose sales and market share to Toyota Motor Corp. and other foreign-based manufacturers.
Ford, after a third-quarter loss of $5.8 billion, added to its suppliers’ woes Monday by saying it would build fewer cars in the first half of next year.
“Dura finally threw in the towel,” said Pete Hastings, an analyst at Morgan Keegan & Co. “Several of the weaker suppliers have already folded, but they will reemerge through the magic of bankruptcy after they shed the high labor costs, heavy debt burdens and overly aggressive sales contracts.”
Spokesmen for Ford and GM said they did not expect production to be affected by the parts maker’s bankruptcy filing.
The filing covers Dura’s U.S. and Canadian operations and comes after the company missed a $17.3-million interest payment Oct. 16. The company said it would consolidate operations and exit unprofitable contracts while under bankruptcy protection.
Dura joins Tower Automotive Inc., Collins & Aikman Corp., Dana Corp. and Delphi Corp. in seeking Bankruptcy Court protection in the last year and a half. Of those parts makers, Dura is the second-smallest by assets. All cited falling demand from Ford and GM.
U.S. Bankruptcy Judge Kevin J. Carey gave Dura permission to pay its employees and ordered the company’s banks to cash all previously written paychecks.
Dura has arranged for about $300 million in loans from Goldman Sachs and British bank Barclays, which are co-lead managers on the financing, so the company can continue to operate. GE Capital also is participating in the loans.
“The entire North American automotive supply industry is at an extremely difficult juncture,” Dura Chief Executive Larry Denton said in a statement. “A financial reorganization under court protections is the prudent course of action.”
Dura posted a $138.3-million loss in the first half of the year after profit fell 85% in 2005 and 48% in 2004.
“I don’t know if they will be able to make the changes that will make them more viable,” said Shelly Lombard, a Montclair, N.J.-based high-yield debt analyst at Gimme Credit. “The issue is that while they are in bankruptcy, their customers will be undergoing dramatic changes.”
Dura, which was formed in 1990, bought 19 companies or units of other companies from 1994 to 2003, increasing sales tenfold while piling up debt to make the acquisitions. Sales were $2.34 billion in 2005.