Industry within industry
Drivetrain parts maker Federal-Mogul Corp., which has been operating in Chapter 11 since October 2001, has been a treasure trove. The company has piled up $518 million in bankruptcy-related expenses.
Delphi Corp. generated $42 million in bankruptcy-related fees during the first nine months of this year, including $13 million in September alone.
Other major suppliers in Chapter 11 include Dana Corp., Dura Automotive Inc., Tower Automotive Inc. and Collins & Aikman Corp.
Mike Selwood, senior managing director of the business-recovery services group of FTI Consulting, said his company anticipated the restructuring activity that would occur in the automotive industry about three years ago and began positioning itself to win some of the business.
Selwood said FTI has carried high-profile roles in 10 major bankruptcy cases in the automotive industry over the past two years.
"We are very proud of that," he said.
FTI Consulting is the financial adviser for Tower Automotive and the restructuring and financial adviser for Delphi. FTI was paid $6.7 million in fees and expenses for its work with Tower from May through July 2006.
Kroll Zolfo Cooper was paid $1.9 million in fees and expenses for its work with Collins & Aikman in June 2005.
A decline in available restructuring work around the country means the automotive industry is one of the few available options for national restructuring firms vying for business, said Tim Weed, a partner in the restructuring operations improvement group at Plante & Moran PLLC in Southfield, Mich.
"If you were to step back six months ago, there was a shortage of restructuring and bankruptcy work out there nationally," said Weed. "And we were the epicenter of restructuring and bankruptcy work."
The decision to sell
Craige Stout, managing partner of Stout Risius Ross, of Chicago, said the decision to sell his firm's 30-person Farmington Hills restructuring practice was made, in part, because the high demand for restructuring work in the automotive industry meant the value of the restructuring group was high.
"We are either at the peak or close to the peak of restructuring as it relates to the automotive industry," Stout said. "And if we are not at the peak, probably most people would agree, I think, that the next 12 to 24 months are going to be the peak."
Since the sale, Stout has been expanding investment banking, valuation services and dispute advisory and litigation services offered from the Farmington Hills office.
Loretta Cross, managing partner of Grant Thornton's restructuring group, said the accounting firm established its restructuring practice May 1 with two partners and a goal of becoming a major player in restructuring within 18 months. It targeted the automotive industry as one of five primary industries it wanted to be involved in.
Today Grant Thornton has 115 partners in 50 countries.
Kimberly Rodriguez, who led Stout Risius Ross' restructuring practice, said Grant Thornton was a perfect home because the accounting firm has a major restructuring presence in Europe.
Rodriguez, now principal and co-leader of Grant Thornton's global automotive practice, provides supply-chain risk-management services on behalf of Ford Motor Co. to suppliers with difficult financial problems.
Now, with the assistance of Grant Thornton's European restructuring presence, Rodriguez is rolling out those services to Ford in Europe.
She predicts that the size and scope of the restructuring services needed by the automakers and large automotive suppliers will continue to drive consolidation in metro Detroit's turnaround industry and said the same forces are playing out with local law firms.