[ Success Story | Automotive Turnaround Consulting ]
Plastech Corporation
Conway MacKenzie was engaged to provide financial and operational advisory services to Plastech Engineered Products, Inc. ("Plastech") in its Chapter 11 bankruptcy proceedings. At the time of Conway MacKenzie's engagement, Plastech was a $1.5 billion supplier of interior and exterior automotive components with approximately 35 plants located in North America.
Approximately 75% of the company's sales related to interior components (door panels, pillars, instrument panels) and 25% of sales were for exterior components (rear bumper fascias and decorative exterior trim such as body claddings, wheel flares, rocker, sill, and spear moldings). 90% of Plastech’s sales were to domestic OEM and Tier I customers, including GM, Chrysler, Ford and Johnson Controls (“JCI”).
In early 2007, Plastech refinanced its debt to provide for more liquidity and more favorable covenants and commenced a process of right-sizing its operations.
Plastech experienced issues due to:
- Rapid growth through acquisition resulted in several under-utilized plants and excess overhead and the price of the primary raw material (resin) increased significantly as petroleum prices increased and Plastech did not have contractual rights to pass a significant portion of this increase on to its customers; and
- Sharp volume declines on domestic OEM production, especially truck and SUV platforms, severely impacted revenue and EBITDA.
In anticipation of covenant violations for Q4 2007 financial results, Conway MacKenzie and Plastech entered into negotiations with Plastech’s major customers attempting to resolve pending commercial claims and in order to seek certain financial accommodations.
Unexpectedly, on February 1, 2008 Chrysler terminated all of its contracts and sought injunctive relief to remove its tooling to immediately resource approximately $200M of business. In response, Plastech filed for Chapter 11 bankruptcy protection and commenced litigation with Chrysler over its motion to lift stay. Interim agreements were reached to stabilize the business while alternative exit plans were being explored.
JCI, in tandem with the First and Second Lien Term Lenders through the formation of JCIM, purchased the Interiors business and Decoma purchased the Exteriors business. The majority of the salaried employees of Plastech retained their jobs with JCIM and the majority of the Interiors business hourly employees were employed by JCIM.
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Conway MacKenzie provided financial and operational advisory services
to the Company. |
