Venture headed for showdown

The future of auto supplier Venture Holdings Co. LLC will be shaped by the outcome of a court battle between management of the U.S. parent company and its German subsidiary, Peguform GmbH.

A week after members of Peguform's management filed for the German equivalent of bankruptcy protection, Venture executives said the move took them by surprise and is unwarranted, in a filing with the Securities and Exchange Commission on Thursday, June 6.

Venture, of Fraser, Mich., is a private company owned by Larry Winget, but files reports with the SEC because it holds publicly traded bond debt. The company ranks No. 33 on the Automotive News list of top 100 global original-equipment suppliers with sales of $2.75 billion in 2001.

Venture said it expects the German judge to rule against the insolvency petition, which it claimed was improperly filed, according to its SEC filing.

The company has not responded to press inquiries yet because "there is a lot going on," spokeswoman Anna Lisa Winget said on Friday. June 7. She said the company expected to have some public comment sometime this week.

But there has been fallout from the German filing. Venture's credit lines and cash flow have been frozen, and the company missed a $14 million payment of bond interest on Monday, June 3, although it has a 30-day grace period, according to Moody's Investors Service in New York. All that has created "significant new uncertainty regarding the company's financial condition and prospects," said analysts with Moody's.

If the German judge rules in favor of the Peguform managers, Moody's said, it could lead Venture's bank group to pull its support. "Moody's believes that a U.S. bankruptcy would likely follow" if that occurred, the report stated. A decision is expected within three weeks.

Financial services group Standard & Poor's downgraded Venture's credit rating to CCC from B+ on Monday, June 3, while Moody's continued a review of the firm with the potential for a ratings fall.

Troubles at Venture would have an impact on General Motors and the Chrysler group. GM tabbed Venture to be the interior integrator for the Hummer H2, which goes on sale this summer. Chrysler hired the supplier to produce the interior for the next generation of the Jeep Grand Cherokee.

Venture is a global supplier of plastic parts, with Peguform standing as one of the biggest producers of bumper systems in Europe.

Venture purchased Peguform, of Boetzingen, Germany, in 1999 for $445 million. The European group retained its own name and operates as a wholly owned subsidiary. The seven Peguform plants in Germany affected by the insolvency petition generate more than 40 percent of Venture's overall revenue, Moody's reported.

The current crisis began on May 8 when Hermes Credit Insurance and Guarantee PLC of London, the insurer providing Venture's suppliers with credit insurance, withdrew its coverage. That left Peguform unable to pay its suppliers in the time allowed under German law, and prompted four members of the management board to seek insolvency. The move does not impact other Peguform operations throughout Europe as well as in Mexico and Brazil.

The German court must investigate the insolvency request and determine whether to finalize it. German automakers, meeting on Tuesday, June 4, agreed to provide the cash needed to keep production rolling at Peguform. Officials would not say exactly how much money was promised.

- Rhoda Miel is a staff reporter for . Terry Kosdrosky is a staff reporter for .