DETROIT - 'We are not filing bankruptcy. Any questions?'
That's the message that Federal-Mogul Corp. Chairman Robert Miller gave to employees in a speech Oct. 25 at the company's Southfield, Mich., headquarters.
The supplier's financial status has been the subject of much speculation since it made several acquisitions in 1998.
The most recent conjecture stemmed from a story by Reuters, which quoted an analyst saying that filing bankruptcy might be a possibility.
That report sent a wave of activity through chat rooms and newsrooms. Federal-Mogul issued a statement on its Web site refuting the bankruptcy option.
Federal-Mogul has missed or revised its earnings estimates for the past six quarters.
Most recently, on Sept. 19, the company announced it would revise its third quarter estimates down from 54 cents per share to break-even, which referred to operating earnings only.
The company posted a $7.6 million loss on $1.4 billion in revenue after taking restructuring charges for the quarter.
Without the charges, the company posted operating income of $1 million. In third-quarter 1999, the company posted net income of $70.1 million on revenue of $1.6 billion. The revision, which surprised the board of directors, cost then-CEO Richard Snell his job.
Miller, who will stay in the CEO's spot until a replacement is hired, said the company is in better shape than many believe.
He said in an Oct. 19 conference call that the company is meeting its debt repayment obligations. The company has $4 billion in debt because of a string of acquisitions made between 1996 and 1998.
Federal-Mogul does not have another major debt repayment due until 2004, Miller said. Additionally, the company still has a $575 million line of credit it can tap in case of emergencies.
Miller said the company is meeting with Chase Manhattan Bank in New York City, the company's main lender, to change the guidelines and ensure Federal-Mogul can continue to meet its responsibilities.
He did say the bank might raise the interest rates or change some of the terms of its loan agreements with Federal-Mogul to do this.