Articles tagged with: automotive suppliers

supplier bankruptcy recurring issues for bankruptcy creditors in the automotive sector

How Much for that Equipment? The Cadence Innovation Liquidation

Feb. 20, 2009 – On February 12, 2009, another volley was fired in the onging Cadence Innovation LLC (“Cadence”) battle with GM.  This time Cadence fired the volley.  In an adversarial “Complaint to recover Money and to Enforce Accomodation Agreement and Stipulation and Consent Order”, Cadence alleges that GM is refusing to pay Cadence more than $4,914,075, including amounts due for equipment and raw material that GM purchased from Cadence.  The purchase price was to be determined as a post-sale matter by an agreed appraiser.  The designated appraiser firm was Hilco Appraisal Services, LLC. (“Hilco”).

The story is not the latest GM/Cadence fight.  The story is the results of the appraisal, which was released on January 13, 2009 and attached to the February 12, 2009 Cadence complaint.  This appraisal shows that the orderly liquidation value is $.10 on the dollar of fair market value.

Fluid Routing Solutions Bankruptcy – Summary Post

In our posts on the bankruptcy of Fluid Routing Solutions, we have discussed unique aspects of this case that made it worthy of study.  These aspects include the following:

  • apparent inability to get institutional financing despite strengths;
  • sophistication of the overall bankruptcy strategy;
  • first day motions that were specifically directed at keeping the supplier base in place;
  • challenges of a bankruptcy of a supplier in the automotive sector;
  • being part of the investment portfolio of a major, private equity player, Sun Capital Partners;
  • DIP financing from a Sun Capital Partners affiliate;
  • close scrutiny given the case by Chrysler, Ford and Toyota;
  • presence of the UAW,
  • speed at which the case was moving. 

Fluid Routing Solutions Bankruptcy – Automakers are Paying Attention; DIP Financing Approved;

Feb. 10, 2009 – This case already is being closely followed by the automaker customers of Fluid Routing Solutions. Three notices of appearance have been filed – counsel to Ford Motor Company, counsel to Toyota Motor Engineering & Manufacturing North America, Inc. and counsel to Chrysler LLC.  An even stronger demonstration of automaker interest is the attendance at Monday mornings’ hearing (February 9, 2009) of counsel for both Chrysler and Toyota.

We would expect that the automakers do not want to see a repeat of the disaster that occurred with Cadence Innovation LLC, where Chrysler and GM ended up in a race to see who could pull their tooling first, and Cadence was left with no alternative but a straight liquidation. While they would never admit it, the automakers are probably monitoring each other as closely as they are monitoring Fluid Routing Solutions to make sure that no one makes any sudden moves.

Fluid Routing Solutions Bankruptcy – A Picture Emerges – But Blurry

Feb. 09, 2009 – The portions of the docket available on Friday, February 6, 2009 presented an incomplete picture of the intended direction of the Chapter 11 Bankruptcy filing of Fluid Routing Solutions Intermediate Holding Corp., Fluid Routing Solutions, Inc., Fluid Routing Solutions Automotive, LLC a/k/a Mark IV Automotive, LLC) and Detroit Fuel, Inc.

The docket is now complete through close of business on Friday. One of the last motions filed on Friday was:

Fluid Routing Solutions Bankruptcy – First Day Motion to Pay Certain Supplier Administrative Priority Claims

Feb. 08, 2009 – Through two “First Day Motions”, Fluid Routing Solutions, Inc. and its affiliated filers (“Fluid Routing Solutions”) are taking steps to hold their own supplier base in place and avoid disruption to its manufacturing operations. The two motions are:

  1. Motion for Order Pursuant to Sections 105(a), 503(b), and 507(a) of the Bankruptcy Code Authorizing Debtors to Pay Certain Prepetition Claims of Suppliers and Vendors of Goods and Services Entitled to Administrative Priority
  2. Motion for Order Pursuant to Sections 105, 363 and 506(b) of the Bankruptcy Code for an Order Authorizing the Debtors to Elevate Certain Prepetition Claims of Certain Critical Vendors to Administrative Priority

This post addresses the first of these motions.

Fluid Routing Solutions, Inc. Bankruptcy – Background; Financial Picture

The bankruptcy filing on February 6, 2009 of Fluid Routing Solutions, Inc. demonstrates that the ability of US automotive suppliers to obtain institutional financing has reached the “lowest possible point”. By analogy, the “lowest possible temperature” is defined as that point when all atomic motion ceases. This bankruptcy filing shows that all institutional financing options have ceased for a US automotive supplier whose customer base consists of domestic automakers.