GPX International Tire Corp. Announces Chapter 11 Restructuring
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MALDEN, Mass. — GPX International Tire Corp. (GPX) has filed for reorganization under Chapter 11 of the United States Bankruptcy Code. The court filing will only affect GPX and not its foreign subsidiaries. Dynamic Tire Corp.; GPX Tyre South Africa (Pty.); Starbright Group, Inc.; Hebei Starbright Tire Co., Ltd.; and EastStar Global Tianjin Inc. are not filing bankruptcy and will continue to operate in the normal course.
The purpose of the reorganization is to separate the company’s operations into three distinct businesses in order to facilitate the sales of those businesses in transactions, which will allow 95 percent of the company’s current North American workforce to remain employed. Some job eliminations may arise from redundancies in corporate functions.
As a result of the reorganization, the company will wind down its European operations. During the Chapter 11 proceedings, GPX will continue to manufacture and distribute tires and service its valued customers. The strategic buyers identified by the company are established entities in the global tire industry. The company expects to complete the sales by Dec. 31, pending approval by the bankruptcy court. During the reorganization, GPX intends to seek court approval to sell the company’s businesses in three transactions:
Alliance Tire Corp. will acquire GPX’s U.S. operations, including its assets, customer relationships, warehouse footprint, worldwide rights to the Galaxy and Primex brands, the company’s medium radial truck tire distribution business and the company’s South African entity, GPX Tyre South Africa (Pty.). Alliance is a global leader specializing in the development, manufacture and sale of highly engineered agricultural, forestry, construction and earthmover tires worldwide. Alliance manufactures in Israel and has recently completed a state of the art factory in India. Alliance will continue to market Galaxy, Primex, other GPX brands, and medium radial truck tires to GPX’s customer base. Alliance will continue to source products from GPX’s valued network of manufacturers in China and elsewhere.
Dynamic Tire Corp., the company’s Canadian subsidiary, will become a separate entity engaged in the sale and distribution in Canada of Galaxy and Primex brand off-the-road tires, the sale and distribution of medium radial truck and passenger car tires and private label sourcing. It will be acquired by a management buyout team led by Robert Sherkin and Peter Koszo. Once the Dynamic sale has been approved by the courts, Dynamic intends to continue to market Galaxy, Primex, other GPX/Dynamic brands and medium radial truck tires in Canada.
The company also intends to pursue the sale of its Solid Tire business as well as its Gorham, Maine; Red Lion, Pa.; and Hebei, China, manufacturing facilities subject to approval by the bankruptcy court. GPX intends to continue to operate this business unit pending its sale. The company is actively working with a potential buyer for this business and expects to have definitive agreements in place prior to closure of the other sales.
The Chapter 11 filing comes after a Department of Commerce (Commerce) Antidumping/Countervailing Duty (AD/CVD) inquiry commenced in June 2007 that resulted in “crippling,” 44 percent duties levied against GPX’s Starbright facility. After vigorously responding to Commerce’s inquiry and filing an appeal of the final duties, the U.S. Court of International Trade ruled on Sept. 18, that Commerce’s application of its AD/CVD methodologies in calculating Starbright’s duties was “unreasonable” and therefore “unlawful.” Furthermore, the Court ruled that Commerce’s decision “was arbitrary and capricious and unsupported by substantial evidence.” Even though the U.S. Court of International Trade ruled in favor of GPX on appeal, the high level of duties set by Commerce in September 2008 had a devastating and irreversible financial impact on the Starbright manufacturing facility and on GPX as a whole, said the company. Accordingly, GPX does not have the ability to wait for a final decision on the duties before completing the sale process.
“The U.S. government’s decision to impose extraordinarily punitive AD/CVD duties on GPX’s Starbright manufacturing facility in China has prompted the difficult decision to sell GPX’s business to third parties,” said Craig Steinke, president and CEO of GPX. “The buyers we have identified are well established in the global tire industry and are positioned to further invest in these brands, grow the business and provide exceptional service to our customer base. The Company’s longstanding tradition of innovation through research and development, superior level of service, and product quality will continue with these new owners. We feel very confident that this will be a positive and smooth transition for our employees, customers and suppliers.” Management expects these transactions to be finalized before the end of 2009.
