Tropical'67

This article appeared in The Detroit News yesterday. Not good news. Get your C6 before the price increases/quality decreases.

Wednesday, April 27, 2005


Auto supplier files bankruptcy

Meridian blames GM, Ford output cuts, cash flow problems in seeking protection.

By Brett Clanton / The Detroit News



About Meridian


Headquarters: Dearborn

Products: Bumpers, fascias, lighting, console modules and instrument panels

Employees: 5,400, including 2,500 in Michigan

Plants: 22

2004 revenues: $1.01 billion

Top customers: Ford, GM, DaimlerChrysler, Toyota, Honda

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Meridian Automotive Systems Inc., a Dearborn-based supplier of automotive body panels and interior components, filed for Chapter 11 bankruptcy protection Tuesday, citing a litany of industry pressures that have battered parts makers in recent months.

The company, with $1 billion in annual sales, will use bankruptcy protection to restructure debts, which have mounted to $600 million in the face of rising commodity prices, production cuts at General Motors Corp. and Ford Motor Co. and a change in the way automakers pay suppliers for parts.

"Meridian has very strong operations, great relationships with a diversified customer base and high-quality products," Meridian CEO Thomas Divird said.

"However, we need to reduce our debt and simplify our capital structure in order to remain competitive under current market conditions."

The company doesn't plan to close any of its 22 plants or lay off any of its 5,400 employees--including about 2,500 in Michigan -- at this time.

Meridian, which supplies parts for such vehicles as the Ford Expedition and Chevrolet Corvette, is the latest major auto parts supplier to buckle under the pressure of industry headwinds.

It follows Novi-based Tower Automotive Inc. and Troy-based Oxford Automotive Inc. and Intermet Corp., which sought bankruptcy protection in recent months. Other major suppliers are downsizing.

Last week, Lear Corp. said it would have to close plants and move manufacturing to low-cost countries to ensure survival.

Analysts say other suppliers are likely to fall.

"It's really bad," said Jim McTevia, chairman of consulting firm McTevia & Associates in Eastpointe, Michigan. "This is just the start of what the future holds for the supplier industry."

"Right now, anybody that's got a lot of debt is in serious jeopardy," added Jim Gillette, a supplier industry analyst with CSM Worldwide in Grand Rapids.

In its bankruptcy filing in Wilmington, Del., Meridian listed consolidated assets of $530 million and debts of $815 million. It included eight domestic subsidiaries in the filing, but not its operations in Mexico, Canada and Brazil.

The first warning signs about Meridian came two years ago when the privately-held company mounted a failed attempt to make an initial public offering, Gillette said.

The failed IPO signaled that investors had doubts about buying into a company with heavy debts and a dependence on business from Detroit automakers, he said.

Standard & Poor's Rating Services said in downgrading the company's credit rating that "liquidity is believed to be very thin because of poor cash flow generation."

Meridian's recent problems are due in part to first-quarter production cuts at GM and Ford, accounting for more than half of the supplier's business. Steel prices, which have doubled since last year, and a 10 percent year-over-year increase in the cost of plastics - a major ingredient in key Meridian products like bumpers - also had an impact, company spokesman Doug Morris said.

In addition, the recent termination of early-pay programs by several automakers dried up Meridian's cash flow for operations by delaying payment for parts when they are delivered rather than before they are shipped.

Meridian said it has secured $375 million in interim financing from Wall Street firm J.P. Morgan to see it through bankruptcy, but is waiting on court approval for the funds.


You can reach Brett Clanton at (313)222-2612 or bclanton@detnews.com.

Jbal

Lighten up here. I'm sure all will be fine!
GEEEEEEEEESSSHHHH!!! Maybe GM should double the price, & produce the car in Peru!

Tropical'67

Not quite but watch for a sizable increase in price for the C6 during the 2006 model run.

robertpel9

GM is in some serious trouble. They have lost the young market. I am 28 and on my 3rd vette but it is pretty much the only american car i am remotely interested in owning. Most of my peer group and younger do not even consider american cars. Ford and GM better wake up and put some products together people might be remotely interested in besides vettes and mustangs. Heck they are even losing ground in the truck market now. They rested on their past long enough. Give us something more inspiring. Look at the GTO, Colbalt, etc. Is this really the best they can do. It's garbage. For my last daily driver i bought a lightly used Mercedes for less than a new impala and i'd do it 10X's over. And please don't give me the buy american BS. I run Three manufacturing plants in Atlanta to make my living but the economy is global now and the best will survive and that is how it should be. American cars are by and large pathetic at this point. Thank god they make the vette and i hope they pull their heads out of their rears so they can afford to continue making it.

Jbal

wheelsetc;
I agree with you on the potential price increase, however, if anything, given the problems at GM, I really feel overall quality will continue to improve.
Jusy my 0.02 cents.

Jammon1

Meridian stated in their chapter 11 filing that operations will continue as normal. The reorganization allows them to restructure their debt, secure additional financing ($375 mil) and the termination of early payment programs by certain OEMs. The bankruptcy will allow them to renegotiate contracts with OEMs. With reduced volumes, increased steel and resin prices their profit margin has been pinched.

The likely result - no change in production or quality, but an increase in price.

Note: Meridian also makes the body panels for the Viper.

Tropical'67

I want to be optimistic the quality will continue to improve too.

Doughan

GM can't afford to raise prices much. If they want to pull in new owners, the Corvette will need to remain an attactive price to performance ratio car. I'll be interested in seeing 2005 Corvette sales. Corvette is one of the few bright spots in GM's lineup. I hope it can stay that way.

wahoo99

Price increase? Please, oh please let it be less than 2%...looking at my first vette mid summer.

2005ArcticWhite

msm859

actually corvette sales for the first quarter are down @5% -- even though production is up. last year they sold @96% of production, this year it is @ 80%

robertpel9

Thats not good considering that a lot of people i know have the Corvette as the only american car they would even consider buying. Lets hope people are just waiting on the Z06 and the 6-speed auto.

MitchAlsup

This shows that GM cannot continue to pressure all of its suppliers to continuously reduce prices--and still have suppliers!

robertpel9

COGS (Cost of goods) has gone through the roof. I run three plants in Atlanta and we are spending over a million a month over budget on Raw Materials. We have passed price increases onto our customers 3 times already this year. We cannot passanother one yet the COGS just grow. We are putting in a plan to reduce them but that will only do so much with oil and steel where it is.

You said GM can't keep doing what they do, they can it will just mean more foreign parts from more questionable suppliers. What they need to do is start making cars that people might actually want to buy and then perhaps they will not have to cut down into the bone.

Like i said outside of the vette what car do they make that is of real interest to the modren consumer?

fstcrr54321

I agree with you. Most young people (I'm 22) would love a corvette but are forced to by imports because most american cars are garbage ( excluding the viper/Caddys/Ford GT). American car companies needs to put the same effort and dilligence into thier every day cars as the vette. I went to autoshow in motion and was very disapointed with the GM line up (excluding caddys/vette). I would like to see Detroit dominate but there seems like there is no quick fix to this problem - well may be they can hire a bunch of Japanese and German engineers. (BTW I just ordered a vette)

BMadden

carjon

Personally, I think a lot of dealer's stock is unsold because they are loading them up with every option. People go into buy what is advertised as at 45K car and the price on the floor is almost 55K before tax etc. Then they are probably getting options that they don't want in a car not the right color etc, with a dealer that barely known how to turn the cars on. That plus the reputation that you don't want to buy are car in its first year makes one wary.
Then although many of us know think so, to the average buyer there is plenty of competetion out there. Maynot be a Corvette but if 55K scares people there is new mustang, 350z + BMW, Porsche etc.

ALFONSE

Why is everyone getting excited, didn't K-Mart do the same and then buy Sears?
AL

StanNH

Can a Hyundai Corvette be far off now?

Hurricane

Plus, I bought a 2005 Chevy Equinox last month - GM still makes a few vehicles I wouldn't mind having and I am really pleased with my purchase so far. I am hopeful that GM will rebound but they need to continue to put out better products. I'm really happy with the Equinox (they paid attention to a lot of details on this SUV) - I am also hopeful that the next generation Tahoe/Suburban will knock our collective socks off!