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Venture’s Bankruptcy Plan Out; Auction Likely

The murky future of troubled auto supplier Venture Industries got murkier as a bankruptcy judge denied the company’s plan to exit bankruptcy after nearly two years. Most likely the Fraser, Mich.-based company — which makes plastic parts such as bumpers and instrument panels for the auto industry — is headed for the auction block with it being sold off all at once, or piece by piece. Venture is one of the world’s largest auto-plastics suppliers and at its peak employed about 13,000 worldwide, including about 2,000 in metro Detroit.

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From Detroit Free Press via MEMA Industry News

The murky future of troubled auto supplier Venture Industries got murkier as a bankruptcy judge denied the company’s plan to exit bankruptcy after nearly two years.

Most likely the Fraser, Mich.-based company — which makes plastic parts such as bumpers and instrument panels for the auto industry — is headed for the auction block with it being sold off all at once, or piece by piece. Venture is one of the world’s largest auto-plastics suppliers and at its peak employed about 13,000 worldwide, including about 2,000 in metro Detroit.

U.S. Bankruptcy Judge Thomas Tucker ruled late Friday that Venture’s former owner, businessman Larry Winget, was within his rights to back out of the reorganization plan he originally supported, one that would have rolled his outside companies into a reorganized Venture.

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Winget controlled several Venture-related companies that were not part of Venture’s Chapter 11 bankruptcy, including some overseas operations that were highly valued. At first he was going to contribute them to Venture, but changed his mind.

Companies operating under Chapter 11 bankruptcy can be reorganized by existing management or can be sold through an auction to the highest bidder. Creditors typically get a portion of their debt — in cash or in equity — if the business is valuable enough to attract new investment.

Venture presented its reorganization plan to the court in May, but Winget began to fight it about a week later saying Venture had sought more financing — about $125 million — than the $85 million Winget had agreed was necessary. Tucker, in essence, said it was permissible for Winget to back out because Venture did not live specifically up to the terms of their deal with him.

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Without Winget, and his valued operations in South Africa and Australia, Venture’s plan to get out of bankruptcy simply does not hold up, Tucker said.

Further hindering Venture’s future is the fact it has won virtually no new business since it filed for Chapter 11 bankruptcy protection in March 2003. It even lost some business in late 2004 when General Motors Corp. pulled a contract to make plastic bumpers for the new Pontiac G6 sedan. It also lost a valued contract with Korean automaker Hyundai Motor Co.

Through his attorneys, Winget lauded the ruling.

“I am hopeful that the court’s decision will bring about a dialogue that will result in Venture exiting bankruptcy successfully,” said Winget in a statement released by his attorneys. “I believe Venture could still be a great company because it still has many wonderful people working for it.”

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Winget’s attorneys declined to say whether he would be interested in biding on Venture’s assets.

“He’s still trying to identify his options. He’s not ruling it out, but it’s too soon to say,” said Nancy Mitchell, a lawyer representing Winget, who founded Venture in the 1970s.

Venture’s fate will be back in front of Tucker on Thursday. Lawyers for Venture, Winget and various creditors will argue how and whether a sale of the company should proceed.

Lawyers familiar with the case say the hope is to have Venture sold off by the end of April in a liquidation

“There are alternatives out there for Venture and we need to explore them now,” said Joel Applebaum, a lawyer representing Venture’s trade creditors. “There is a parade of horrible things that could happen, but I don’t want to list them. We’ll know more Thursday.”

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While the goal will be to sell off the company as a whole, auto insiders said it is more likely Venture would be sold off in a few separate parts. One scenario could be the company’s interior-plastics division being separated from its exterior-plastics unit.

Venture generates worldwide sales around $900 million with about $500 million of that in North America, according to recent court documents. Venture’s largest customers are DaimlerChrysler AG and GM.

“I don’t know that there are many buyers out there,” said Jim Gillette, auto-supplier analyst for CSM Worldwide. “There is sufficient excess capacity out there in auto plastics. A lot of the people that might want to buy it are having struggles of their own.”

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The case has been contentious. Venture sued Winget and his family members in April alleging he siphoned $314 million from the company before it went into bankruptcy. The court has held that case in abeyance while it ruled on the reorganization plan.

Later, Venture blew the whistle on itself and Winget, filing papers with the U.S. Securities and Exchange Commission that said the company engaged in improper accounting under Winget.

The company originally hoped to exit bankruptcy by the end of 2003, and then by summer 2004.

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