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Findlay puts Europe unit on block

DETROIT - Findlay Industries Inc., one of North America's largest privately held auto parts makers, is attempting to sell its European business to raise cash to keep its troubled U.S. operations afloat.

The proposed auction of that business, Findlay Industries Deutschland GmbH, a supplier to BMW AG and Volkswagen AG, could raise between $70 million and $100 million to help Findlay stave off pressure from its bank group, say industry sources familiar with the effort.

The funds are needed urgently, the sources say, because Findlay has fallen out of compliance with the terms of its bank loans. According to these sources, the banks have given Findlay only until the end of the year to return to compliance.

Although it is a relatively small, family held company, Findlay's troubles echo those of the supplier sector at large. Declining sales to the automakers are squeezing suppliers' profits at the same time they're stuck with big debt to pay for expanded capacity and acquisitions they no longer need.

Federal-Mogul Corp. and Canadian supplier A.G. Simpson filed for bankruptcy protection last month. And several of the sector's biggest companies last week posted dismal earnings results for the third quarter and warned of more pain to come.

"Many suppliers simply do not have the wherewithal to survive, let alone prosper," in the current climate, said analyst Michael Heifler of Bear, Stearns & Co. Inc. of New York.

Findlay's European operation, which posted sales last year of some $200 million, operates seven plants in three countries. It produces head-

liners, door trim, seat backs and package trays.

In North America, Findlay supplies assembled seats to Tier 1 supplier Johnson Controls Inc. for the Chevrolet TrailBlazer, Oldsmobile Bravada and GMC Envoy.

Like much of the rest of the industry, Findlay Chairman and founder Philip Gardner followed the business model pushed by the Big 3 - get big fast and go global. Over 42 years, he expanded Findlay to 24 plants in Europe and North America, employing 5,000. Much of that growth has taken place since 1997, when he expanded into Europe.

Sales last year jumped 61 percent to $845 million, which ranked the company 71st on the Automotive News list of top original equipment suppliers to North America.

Gardner declined requests to be interviewed.

The Big 3 have begun cutting production to cope with weaker sales, but the capital spending and acquisition binge of the 1990s has left the supplier sector overbuilt. Many suppliers, such as Findlay, have been unable to pay the debt they used to pay for expansion and acquisitions without selling assets.

Findlay is intensely private and provides no financial details. But Gardner's 1997 decision to expand into Europe required big help from his banks.

Sources close to the company say it posted a loss last year of more than $10 million from its North American operations, although the European business is said to be profitable.

Findlay began hurting even before the slowdown. It is heavily dependent on sales to Class 8 truck manufacturers, a segment that turned sharply lower last year. It supplies interior trim and sleeper cabs to Freightliner Corp., AB Volvo and International Truck and Engine Corp., all of which have slashed production.

Findlay also has been under intense pricing pressure from its Tier 1 customers.

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