Canadian Plastics

Meridian bankruptcy: Auto parts supplier reemerges

By Umair Abdul   

Following in the steps of many other automotive plastic part suppliers, Allen Park, Mich.-based Meridian Automotive Systems, Inc. filed for bankruptcy in 2005. But the company continued to honour its ...

Following in the steps of many other automotive plastic part suppliers, Allen Park, Mich.-based Meridian Automotive Systems, Inc. filed for bankruptcy in 2005. But the company continued to honour its contracts with its customers while trying to reconcile its debt.

Now, almost two years after the company filed for Chapter 11 protection, Meridian has emerged from bankruptcy. The supplier has secured a US$167 million court-approved exit financing commitment with Deutsche Bank.

It’s back to business as usual for Meridian’s 21 primary facilities, where the company manufactures front and rear end modules, thermoplastics and composites for automobile exteriors, and lighting and interior systems for original equipment manufacturers (OEMs) and Tier One parts suppliers. Meridian also operates plants in Brazil, Mexico and Canada.

“We are all very excited to have emerged,” Fran LeVeque, Meridian’s chief commercial officer and executive vice-president, said. “We are taking the opportunity to move forward, and we are getting a very good response.”



In an auto plastics industry that has been plagued by bankruptcies, plant closures and massive layoffs, Meridian was fighting against the odds. The mounting cost of raw materials like resin had a major impact on the company’s finances. “We were pretty much left to our own devices to get the best deals that we could,” LeVeque said.

Additionally, company bosses had to contend with the production cuts made by OEMs. Detroit’s “Big Three” — Ford Motor Company, General Motors and Daimler-Chrysler — make up almost 70 per cent of Meridian’s business. Changes in the OEM early payment programs also made it harder for the company to balance its finances. “It was basically the liquidity, we had been getting paid on a much shorter cycle,” LeVeque explained, noting that payment periods went from 15-20 days to about 45 days.

Although Meridian’s manufacturing operations were strong, the company was carrying too much debt.


Meridian’s previous financial struggles have become a familiar tale in the auto supplier industry. The company is just one of more than 20 auto suppliers who have filed for bankruptcy recently, and the effects are still being felt by Canadian subsidiaries. Auto parts supplier Collins & Aikman, for example, recently announced that it might have to close five of its plants in the coming months, two of which are located in Ontario. The company is trying to liquidate its assets, and the two plastic parts plants — located in Gananoque and Scarborough — are a harder sell. “We recognize that due to the excess capacity in the plastics sector, there may be a number of plants that are less likely to be sold,” company spokesperson David Youngman said.

Unless the plants find a buyer or the facilities are needed for additional production, more than 425 jobs could be lost. “That’s the norm for coming out of bankruptcy, usually it’s major restructuring and a lot of people lose their jobs,” Buzz Hargrove, Canadian Auto Workers (CAW) president, explained. “It’s usually the workers who pay the biggest penalty.”

But Meridian has been able to circumvent personnel cuts as well, retaining about 85 per cent of its workforce. Although a major project was transitioned out of the company’s lone Canadian plant in Brantford, Ont., a CAW representative for the area said the company still employs about 100 people at the plant.

Since the company’s operations were already strong going into bankruptcy, Meridian continued to deliver on its commitments instead of using the specter of Chapter 11 to walk away from them. The supplier even added three new accounts while being under.

“Our [customer] relationships were perhaps strengthened through the process because we did not reject contracts from any of our customers,” Meridian’s LeVeque said. “We worked through commercial resolutions for all of our relationships.”


Meridian has also made several changes that will allow the company to ensure its financial stability. The company’s different operations have been consolidated under one chief operating officer to help streamline business decisions. Processes have also been introduced to make adjustments for soaring raw material costs. “We’ve got customers that are kind of doing the hedging for us, they have processes where we are managed by program,” LeVeque said. “They basically take all the fluctuation out of the GPOs.”

Meridian has managed to succeed where many other plastic auto part suppliers have failed. Executives are hopeful that the company’s increased liquidity and consolidated business model will make for a more capable competitor in the tough auto supplier industry. “It’s not an easy environment, and we didn’t go away for 20 months and come out to find it any easier,” LeVeque admitted. “We have to provide value to all of our customers, and that’s what we strive to do.”


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