DETROIT-- Blue Water Plastics Inc. has filed for Chapter 11 reorganization, marking the second time in less than two weeks that a large automotive plastics parts maker has entered Chapter 11.
Michael Lord, CEO of the Marysville, Mich., company, cited serious issues in the plastics segment of the auto parts industry in a press release about the filing.
The company listed more than $10 million in debts in its Feb. 12 filing in Bankruptcy Court in Detroit. The firm has more than $200 million in annual sales and specializes in functional plastics, including air-handling systems.
Blue Waters filing came just 12 days after Plastech Engineered Products Inc., of suburban Detroit, filed for Chapter 11 protection.
New York-based financial group KPS Special Situations Fund bought Blue Water in 2005 from Switzerlands Sarna Polymer Holding Inc., which had purchased privately owned Blue Water Plastics Inc. in 2000.
KPS brought in Lord in 2006 to oversee a turnaround plan that included closing two plants, refocusing operations and streamlining production. The work garnered support, and Blue Water won additional business from automakers nervous about the financial stability of other firms.
In October, the company invested $10 million to update equipment as new work came into the plants.
Blue Water has accomplished a great deal in recent years by implementing a turnaround plan that included right-sizing our work force, closing facilities, moving machines, increasing productivity, installing new management and launching new products, Lord said. Unfortunately, we have reached this point because of serious issues in the plastics segment of the automotive parts industry.
Production remains strong and is near full capacity, said James Sampson, vice president of sales and engineering, in a phone interview today, but the company also is dealing with resin prices that have doubled in the past three years. The company also has production costs related to three major contracts launching in April, May and June.
Blue Water has invested in equipment and training for those programs but will not start seeing a return on its investments until after its automaker customers begin production.
If you look at the industry, a huge portion of the industry is in distress, and there are elements that are very dysfunctional right now, he said.
Blue Water is seeking approval for $30 million in debtor-in-possession financing that will allow it to continue paying its bills, he said. It also has been working closely with its customers to keep operations running smoothly.