Auto parts suppliers caught in “perfect storm”
T he past few months have witnessed the demise of several Southern Ontario-based auto parts suppliers.
The past few months have witnessed the demise of several Southern Ontario-based auto parts suppliers.
The assets for Tri-Star Plastics Corp., of Mississauga, Ont., were auctioned off in June. The company filed for bankruptcy in May, owing nearly $5 million to secured creditors and an additional $12 million to unsecured creditors. The company’s unsecured creditors consisted of a number of prominent industry names, including several well-known resin suppliers. Bankruptcy documents showed that the company’s assets were valued at just enough to cover its secured creditors.
Also in June, Vaughan, Ont.-based Progressive Moulded Products Ltd. filed for bankruptcy protection in an attempt to restructure its operations and reduce its financial burden. Declining automotive sales, increased cost of commodities and materials, and pressure from manufacturers had put an immense strain on the company.
“When the company had filed for protection on June 20, we made clear our hope that negotiations would result in solutions to its financial challenges that would be acceptable to major customers and financial lenders,” said Progressive’s spokesperson Michael Daniher. However, those solutions would have taken time, and many of the company’s major customers decided to move their work elsewhere.
The loss of work necessitated a significant reduction in Progressive’s workforce. At press time, the company had laid off more than 2,000 workers at its Ontario and U. S. facilities.
For now, it remains unclear if Progressive will be able to restructure its operations bounce back. But, Daniher noted, “any time you lose 90 per cent of your business, it doesn’t bode well for the future.”
Recently, Oakville, Ont.-based compression molder Polywheels Manufacturing Ltd. also filed for bankruptcy protection under the CCAA. The company, which primarily made truck and SUV plants for Ford and GM, cited high oil prices and slowing demand as part of the problem.
However, founder, president and CEO Frank Milligan also said that the company approached the OEMs for some assistance over the summer. Instead, the OEMs decided to send trucks for their tooling and relocate their production elsewhere.
“We were forced to file for CCAA protection very quickly because of GM’s posture,” Milligan said in an interview with Canadian Plastics. “They said they were coming for their tools and they weren’t prepared to pay their payables.”
Polywheels’ future remains uncertain, but Milligan noted, “if the company is restructured, it won’t be automotive.”