Findlay Industries Inc., a key supplier of seat assemblies to General Motors, has until June 30 to raise enough cash to pay loans or face another showdown with its banks.
Findlay's other creditors also are hoping company founder and Chairman Philip D. Gardner's turnaround plan will raise enough cash to pay their claims as well.
GM is monitoring the situation closely because Findlay assembles Johnson Controls Inc.'s seats for the hot-selling Chevrolet TrailBlazer, GMC Envoy and Oldsmobile Bravada sport-utilities. The seats are produced at Findlay's plant in West Carrollton City, Ohio, about five miles southwest of GM's Moraine, Ohio, assembly plant.
In a rare interview, Gardner, the sole shareholder, blamed Findlay's financial problems on his four-month absence from the company because of illness early last year.
"Something snapped during my absence," Findlay said, but declined to provide details.
Gardner, 84, said the Findlay, Ohio, company he founded 43 years ago is "making money; has debt under control" and is on track for a full recovery.
December deadline averted
Findlay faced a crisis in December. A consortium of banks led by National City Bank of Cleveland demanded the parts maker repay its loans by Dec. 31 because its debt levels violated its loan terms.
Findlay's problems forced Johnson Controls late last year to step in and help financially.
"A lot of Tier 2s are teetering and, unfortunately, Findlay is one of them," says Rande Somma, president of Johnson Controls Inc.'s Automotive Systems Group. "We are trying to help them succeed."
Like many suppliers, Findlay got into trouble with ambitious growth plans financed with borrowed money. Gardner expanded Findlay to 24 plants in Europe and North America, pushing employment to 5,000 people.
But sales to North American automakers dropped 5.6 percent to $574 million for 2000, the last year for which numbers were available. That ranked Findlay No. 71 on Automotive News' list of top 150 original equipment suppliers to North America. Findlay's worldwide original equipment sales totaled $776 million in 2000, an 8.2 percent drop from the year before.
Declining sales to automakers are putting all suppliers' profits under pressure. At the same time, many are burdened with big debt to pay for the expanded capacity and acquisitions that have become a financial drain.
Refinancing buys time
Findlay tried to raise cash last year with a plan to sell its profitable European business, Findlay Industries Deutschland, a supplier to BMW AG and Volkswagen AG.
The business attracted several bidders, at least one who was prepared to pay the estimated $70 million to $80 million sought by Findlay, sources said. But Gardner decided he would be better off refinancing the unit than selling it.
"It was stupid to sell it," Gardner said. "We put too much money into it for what they were offering it for. We're making money there. Why sell?"
Findlay refinanced the European business with a loan from Bank of America in London. Some of the loan's proceeds were used to extend the terms of Findlay's U.S. loans from Dec. 31 to June 30, according to two sources.
Gardner blasted his U.S. banks, claiming, "They tried to put me out of business" with their repayment demands.
National City spokesman Bill Eiler said it is inappropriate for the bank to comment on a company that his bank and other institutions are financing.