Lear becomes third auto parts maker to go bankrupt this past month
Filed under: Economy, Earnings
Talk about a depressing statistic: Lear Corp. (LEAR) today became the third major auto parts supplier to file for Chapter 11 bankruptcy in the past month.The company's fall from grace is hardly shocking given the precarious state of the U.S. auto industry and the economy overall. Back in March, Lear said its auditors had raised concerns about its ability to remain a "going concern" and warned that it might have to seek protection from creditors even though it won an agreement that gave it extra time to restructure its balance sheet.
"The debt restructuring, which would leave Lear with $1.1 billion in debt and $500 million of convertible shares, calls for trade creditors to be paid in full, except in limited situations," according to the paper.
The DIP agreement provides that, subject to certain conditions, the DIP financing will convert into exit financing with a three-year term upon Lear's emergence from Chapter 11.
Whether Lear's plan is overly optimistic remains to be seen. Auto sales in June were dismal but showed some signs of improvement. Ford Motor Corp. (F) appears to be gaining market share at the expense of its bankrupt rivals General Motors Corp. (GMGMQ) and Chrysler L.L.C.. Sales are expected to hit 10 million this year, which is about the level the U.S. industry needs to be sustainable, according to analysts.
A vicious circle is created as broke car companies and auto parts suppliers drag each other down into a financial death spiral that will be difficult for them to extricate themselves.
Why is Oprah going to cable? A hint: It's nothing to get teary about
Kisses from Hershey: Candymaker may court Cadbury with $17 billion bid
D-Day for Harry Reid: Can he wrangle 60 votes for Senate health reform bill?
Reader Comments (Page 1 of 1)
7-07-2009 @ 7:52PM
moparnutz said...
Take the money and run .... Over bought ... over sold ... over priced... over rated ... no one needs1, any of them ... no one is going .. .. to miss... not a damned one of 'em!!! ...
Reply
7-07-2009 @ 5:32PM
DirectionDd said...
Lear needs to re-tool and come up with a line of rubber bands that will fuel the new green cars of the future. I feel so much better with all this clean air.
Reply
7-07-2009 @ 7:04PM
George said...
Obviously this company does not know what it is doing. I think the government should take all of the bondholders and shareholders stake in this company and give one third to FIAT in Italy, 15% to the governent of Canada, and 52% to the UAW. The balance could be shared equally between the equity and secured lien stakeholders.
Reply
7-07-2009 @ 8:58PM
3rdgenerationdropout said...
The USG should have left these American companies in the hands of the founders and their families instead of taxing them away with exhorbinet death taxes. Well all you big time tax and spenders it looks like chickens are coming home to roost.
Reply
7-07-2009 @ 11:03PM
Julita Harris said...
I am disturbed to hear that Lear will file for chapter 11 after the settlement of 5.25 million dollars which would have help those of us like myself receive sum of the money that was swindled from under us the working class. When we lost our job at Lear Atlanta 2006 , Lear gave us nothing . So nothing from nothing leaves nothing.
Reply
7-08-2009 @ 1:04AM
joe d said...
I wonder how much of a binus the CEO will get this yr 5 or 10 million
Reply
7-22-2009 @ 2:43PM
felix chesterfield said...
Will a site like this for GM car and truck parts still be around?
Reply