As the wave of parts suppliers filing for Chapter 11 has grown in the past few years, the common theme has been that the ones left standing would reap the benefits. Theoretically, they can do this by either acquiring their liquidating brethren or capturing the parts programs these other companies leave behind.
But as Progressive indicated in its bankruptcy filing, just picking up the business of others isn't enough to withstand an environment battered by continued production cuts and sales problems. Interestingly enough, Progressive has added several programs over the past few years in an effort to mitigate the industry's dwindling sales -- with a few of those programs coming from none other than defunct Collins & Aikman Corp.
As Collins knows all too well, however, parts makers don't see the fruits of new programs for years and are often battered in the short term by startup costs. Such was the case for Progressive, whose $500 million debt load made the increased operational costs even more prohibitive.
The situation bears watching, for example, with the recent carve-up of Plastech Engineered Products Inc., which sold four of its business lines for a little more than $200 million last week. How will its buyers -- such as Magna International Inc., which has said it will cut about 400 workers in September -- fare with the integration and onset of operational costs? - Ben Fidler
Comments
When auto parts maker Progressive Moulded Products Ltd. tumbled into Chapter 11 on June 20, it exposed an interesting wrinkle that may be worth watching in the sector.
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