Beset by falling prices for its auto antennae, Ward Products LLC last year began restructuring with a move of its assembly work to Mexico - only to run out of cash.
Last month, the North Brunswick, N.J., parts maker filed for Chapter 11 creditor protection in U.S. Bankruptcy Court in Detroit.
As North American auto parts makers come under increasing pressure to move manufacturing to low-cost countries, disruptions are almost inevitable, says John Groustra, a partner with the turnaround firm Conway MacKenzie & Dunleavy, of Birmingham, Mich.
"The one thing certain in moving manufacturing is that something will throw you off the timeline, so you have to plan for it," Groustra says.
Ward took the gamble by moving its production from Amsterdam, N.Y., to Tijuana, Mexico, because of customer pricing pressure. Ward recorded sales last year of $30 million from cable assemblies and $10 million from masts.
Ward CEO Joseph Honer did not return calls, nor did company attorney Mark Freedlander at the office of law firm McGuireWoods LLP in Pittsburgh.
Ward had hoped that the 2005 move would offset the lower parts prices it was getting by cutting operating costs, which in turn would improve liquidity and working capital. But production inefficiencies and inventory management issues arose, according to court papers.
Just as Ward executives thought the company was about to break even on its Mexican venture, the effort came undone. The company suffered a financial crunch so severe that in July it turned to emergency funding from its two largest customers, Ford Motor Co. and the Chrysler group, according to court documents.
Ford and Chrysler have a $1.45 million secured claim after purchasing an interest in Ward's revolving loan.
The owner of privately held Ward is the private equity fund MidMark Capital II LP, which has the largest unsecured claim. The fund is controlled by buyout specialist MidMark Capital, of Morristown, N.J. Calls to MidMark managing director Wayne L. Clevenger were not returned.
According to court documents, Glass & Associates Inc., which was recently retained by distressed parts maker Dura Automotive Systems Inc., of Rochester Hills, Mich., is providing Ward's restructuring counsel.
You may e-mail Robert Sherefkin at [email protected]