From the Detroit Free Press

DEARBORN, MI — Plastech Engineered Products Inc., a growing plastics auto parts maker from Dearborn,MI is expected to launch a bid in bankruptcy court this week for rival Collins & Aikman Corp., a company roughly four times the size of Plastech.

Three people familiar with the expected bid told the Detroit Free Press that Plastech hired a New York law firm to let C&A know of its interest, and the bid is expected to include financing from prominent New York investment firm Goldman Sachs.

The deal would have ramifications for the auto industry and thousands of workers, because C&A parts are used in about 90 percent of all the cars and trucks built in North America. If successful, the bid for Troy, MI-based C&A could ensure a steady supply of parts to assembly plants across the country — something that has caused concern among Detroit’s automakers.

The deal would also create one of the country’s largest female-owned companies. The closely held Plastech is owned and run by Vietnam-born Julie Brown. For perspective, in terms of revenue, Plastech is already more than four times the size of Oprah Winfrey’s Harpo Inc. media empire.

But the potential deal faces many hurdles — such bids in bankruptcy proceedings are often the start of a complex process subject to court proceedings, negotiations and approval by the bankruptcy judge, creditors and the company.

Plastech makes several dozen auto parts such as mud flaps, door panels and battery trays. It is the largest company in the state owned by a woman.

Plastech plans to make its offer for C&A official later this week. Financial details would be made public then.

Collins & Aikman, which has about 23,000 employees worldwide and generates about $4 billion in annual business, filed for Chapter 11 protection in U.S. Bankruptcy Court in Detroit in late May shortly after its Chairman and Chief Executive Officer David Stockman was forced out. Stockman, a former Michigan congressman, once served as budget director for the Reagan administration.

C&A makes a wide array of parts such as instrument panels, center consoles and carpeting. Its financial struggles already have required more than $360 million in emergency funding from automakers to keep it afloat. If the company went under — in mid-May, the company ran out of money — it could slow down or shut down auto plants across North America or even Europe.

Plastech has discussed its interest in buying C&A with Detroit’s three automakers, which each do about $1 billion or more in business with the company and have C&A parts on important vehicles such as the Ford Mustang, Chevrolet Corvette and Chrysler 300.

Plastech came away “with the idea that the automakers are supportive of the move,” said a source familiar with the offer.

C&A spokesman David Youngman said he could neither confirm nor deny an impending offer from Plastech, but added C&A is just trying to get through the bankruptcy process first.

“We have not accepted any offers, but instead are focused on developing our business plan as required under bankruptcy,” said Youngman. “At end of the month, we will determine what course of action might maximize the value of the company. That could include the sale of the business or portions of the businesses.”

C&A has told customers and the bankruptcy court that by Aug. 31, it will present a business plan to the customers and creditors that will lay out what contracts the company would want to keep or reject as well as what plants or operations it would keep open or close.

Plastech hopes to buy C&A as quickly as possible, before the supplier loses any business or customers, said people familiar with the deal.

Corporations often like to buy other companies out of bankruptcy because the purchase comes free and clear of all sorts of financial obligations, like pensions, labor claims or product-liability suits.

Companies are also far cheaper to buy in bankruptcy — which is why a company one-fourth the size of C&A could bid to purchase it. Plastech’s ability to make such an offer depends largely on how much money investors and bankers are willing to put forward.

The fate of employees or retirees of a bankrupt company can be tumultuous, as bankrupt companies can reject the pensions or obligations they have to former employees. That has happened at dozens of steel companies, including Ecorse-based Great Lakes Steel, which went bankrupt during the last decade.

In those cases, the federal government’s pension bailout fund took over those obligations; the fund pays out a fraction of what the original employer paid. It’s unclear whether C&A will seek to transfer its pension obligations to the government.

Any money from the sale of a bankrupt company’s assets goes into the company’s estate and then gets distributed according to the bankruptcy code, with banks typically among the first to get paid.

“The company being sold will usually go around and talk to creditors and unions and other interested parties like customers to see if they are OK with the sale,” said Tom Yoder, a bankruptcy lawyer and American College of Bankruptcy fellow.

“The bidder, the suitor, becomes the white knight or the stalking horse, but of course their deal is subject to higher and better offers,” he said.

Yoder added that a competing bid — and one C&A insider said the company expected more of them — could have a significant impact on C&A and its employees. C&A has about 3,000 employees in Michigan.

Typically, companies in bankruptcies will shrink as its owners try to trim the business, shedding unprofitable contracts or plants. Recent Detroit companies to go into bankruptcy, including retail giant Kmart Corp. and auto supplier Venture Corp., exited bankruptcy with far fewer employees and sites than they had before.

If Plastech were to buy all of C&A, it’s unclear which plants or people would be kept. Much would depend on whether the employees worked in plants or divisions that made money or fit into Plastech’s strategy.

Said a person familiar with the pending offer, Brown wants C&A for its business with Asian automakers as well as its contracts on products such as instrument panels, a line of work Plastech does not have.

Brown and Stockman had talked about her buying parts of C&A for three to four years. Plastech has hired the New York law firm Skadden Arps to contact C&A’s financial advisers, the New York investment firm of Lazard Freres. The two parties spoke early last week.

Brown formed Plastech in 1988, when she acquired an injection-molding plant in Caro. The company grew through a series of acquisitions and now has estimated annual sales of $1.3 billion and about 7,500 employees in North America.

The company’s largest customers are Ford Motor Co. and General Motors Corp. C&A’s largest customer is DaimlerChrysler AG. It also has substantial business with Toyota, Nissan and Honda.

If it acquired C&A, Plastech would become the fourth-largest privately held company in Michigan, just ahead of Detroit Pistons owner Bill Davidson and his Guardian Industries Corp.

Plastech is already considered highly leveraged by some because it had to borrow up to $515 million to purchase LDM Technologies in early 2004 and pay off other debt.

For much of the company’s history, Brown and Plastech have kept a low profile. Brown has rarely granted interviews. But all the while, her company has grown as it lands new contracts. Should the C&A deal become a reality, the company’s low-profile days would likely come to an end.

2005 The Detroit Free Press. All Rights Reserved.

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