DETROIT -- One of Detroit's oldest suppliers of luxury has hit a financial wall despite a global market that is calling for premium materials.
GST AutoLeather Inc., a global producer of automotive leather for seats and interiors, filed for Chapter 11 bankruptcy protection this month in U.S. District Court in Delaware, claiming $196 million worth of debt to more than 750 creditors and assets of between $100 million and $500 million.
Details laid out in its court documents paint a picture of a North America-focused Detroit company that was acquired in 2008 by a Japanese private investment group, was rapidly expanded to global markets and has been facing down numerous operating challenges in locations from Europe to China.
Among them: A European automaker who pushed back one-fifth of its GST leather-related product last year, claiming the goods had not been correctly validated in accordance with the customer's supply chain rules.
GST leather is used in Audi, BMW, Ford, Toyota and Volkswagen vehicles, among other brands. According to court documents, the company, which started in 1933 as Garden State Tanning, has secured $40 million in debtor-in-possession financing to continue operating.
The company's owners, Advantage Partners of Tokyo, have been trying to sell GST over the last two years, according to the filings. In recent months, three potential buyers have dropped out of potential purchases.
Advantage Partners bought GST in 2008 for $310 million from Citibank Venture Capital and its affiliate SILLC Holdings.
A spokeswoman for the bankruptcy case declined to answer questions about the bankruptcy or make company executives available to discuss the situation, instead referring Automotive News to the documents.
Not contained in the documents is a market report published this year by the research firm Future Market Insights, which forecasts a 5 percent annual growth rate for automotive leather revenues worldwide through 2026 and a steady outlook specifically for the North American automotive leather market. The forecast refers to GST as one of the leather suppliers that are "recognized as industry leaders in the global market."
As recently as the 1980s, the supplier embraced Toyota Motor Corp.'s example in improving its U.S.-centric manufacturing operations in a bid to expand its customer base to non-Detroit 3 vehicle programs.
GST now has 5,600 employees worldwide, posted net global sales of $540 million in 2016 and has operations in China, South Korea, Germany, Mexico, Hungary and South Africa. Six years ago, GST acquired one of its major leather competitors, the century-old Seton Co. of Detroit.