DETROIT - Construction continues at Meridian Automotive Systems Inc.'s $28 million bumper fascia plant in Fowlerville, Mich., while the company works its way through Chapter 11 reorganization.
Production also remains smooth at the Dearborn, Mich., auto supplier's 22 U.S. operations after Meridian's Chapter 11 filing last month in U.S. Bankruptcy Court in Wilmington, Del.
"Meridian will continue to operate normally while it restructures its finances," CEO Thomas Divird said.
The plastics supplier has received $375 million in financing to continue operations.
The filing does not affect Meridian's operations in Mexico, Canada and Brazil.
Meridian ranks No. 48 on the Automotive News list of the top 150 suppliers to North America with North American original-equipment automotive parts sales of $1.0 billion in 2004.
Meridian has the same problems facing many suppliers to the U.S. auto industry: Customers' market share is falling, raw material prices are increasing and automakers are demanding price decreases.
Those "very difficult industry conditions" with Meridian's $600 million in total debt combined to push the company over the edge, said Martin King, an analyst with New York rating agency Standard & Poor's.
"Industry conditions for automotive suppliers have deteriorated during the past year," King said.
So far the hammer has fallen hardest on metal specialists that are battling increasing prices for steel. Since the last quarter of 2004, Tower Automotive Inc., Intermet Corp. and Oxford Automotive Inc. all entered bankruptcy protection, citing steel price increases as an important factor.
Resin a problem
Meridian becomes one of the first major suppliers entering Chapter 11 that has cited the price of plastic resin as a key problem.
The company injection-molds bumper fascia and other interior and exterior components. Its composites operations take in both sheet molding compound and reaction injection molding. Meridian has a high profile on the 2005 Honda Ridgeline pickup, molding the lockable, in-bed storage trunk.
"Although some of the company's raw materials are purchased through customer resale programs that insulate it from cost increases, Meridian is exposed to market price fluctuations for a significant portion of its total material purchases," said King, the Standard and Poor's analyst.
The overriding concern is Meridian's balance sheet, executives said.
"We need to reduce our debt and simplify our capital structure in order to remain competitive under current market conditions," Divird said.
Lead equity owner Windward Capital Partners LP created Meridian through a series of acquisitions, starting with American Bumper & Manufacturing Co. in 1997 and following up with injection molder Lescoa Inc. and energy-absorbing foam maker Lorro Inc.
In 2000 Meridian spent $363.1 million to buy the assets of composites specialist Cambridge Industries Inc. The company wants to be a complete exterior specialist, capable of producing front and rear-end modules in addition to entire truck boxes.
A year ago, things were looking good enough that the equity partners withdrew $60 million in equity from the company. But in light of the Chapter 11 proceedings, the equity team may be forced to refund the money.
Terry Kosdrosky of Crain's Detroit Business contributed to this report