DETROIT -- The surge in auto suppliers seeking Chapter 11 bankruptcy protection has prompted Ford Motor Co. and the UAW to launch separate efforts at revising parts of the federal bankruptcy code.
Ford global purchasing chief Tony Brown last week called for changes specific to the auto industry that would make it easier for automakers to recover tooling and other assets from suppliers that file for Chapter 11.
In a separate effort, the UAW backs a bill introduced in Congress this month that would make it harder for bankrupt suppliers to move U.S. jobs to foreign operations. It would direct courts to consider a company's foreign assets when deciding whether the company can break its union contracts.
The bill backed by the UAW comes in response to a the growing loss of jobs linked to Chapter 11 reorganization efforts.
Both Delphi Corp. and Dana Corp., the two largest auto suppliers currently in reorganization, filed Chapter 11 only for their U.S. operations. Both companies plan to move more operations outside the United States.
"Some international corporations that are struggling domestically use their losses at home to justify breaking contracts with American workers while their overall company is still thriving," said a statement issued by the bill's sponsors, Sen. Evan Bayh, D-Ind., and Rep. John Conyers, D-Mich.
The bill also would crack down on so-called "management retention plans" that companies such as Delphi have proposed to pay bonuses for managers and executives who agree to stay during a Chapter 11 reorganization.
Brown wants automakers to have increased access to crucial tooling after a supplier files Chapter 11.
"Right now, things get locked down and swept up in the (Chapter 11) case," Brown told Automotive News after his speech at a conference at the Federal Reserve Bank of Chicago-Detroit Branch.
The U.S. bankruptcy code was amended in 2005. But Brown said automakers need more changes given the current business climate.
For example, when a Tier 1 supplier files Chapter 11, an automaker should be able to retrieve its tooling more easily in order to find another supplier to continue that production.
About 15 major suppliers are operating under Chapter 11 protection. Six of those did more than $1 billion in direct business with North American auto manufacturers in 2005.
Once a supplier enters Chapter 11, automakers must petition the court to remove tooling from a debtor company's plant and shift the work elsewhere.
Typically, the process takes several months.
"In general, troubled suppliers wouldn't like it because this would transfer more leverage to the customer," said Craig Fitzgerald, a consultant who handles supplier clients for Plante & Moran PLLC in suburban Detroit.
"Healthy suppliers would like this because they would be the beneficiary of resourced work from troubled competitors."
Brown said he first brought up the idea at the annual industry gathering at Greenbrier Resort in West Virginia last fall. He said other industries, such as public utilities and shopping center landlords, already have specific protection in the law.
Brown said discussions about possible legislation remain preliminary. He wouldn't say whether other automakers or their associations are interested in joining the effort.
"They'll have to decide on their own," he said.
"There are a number of things we can work together on."
