With sales numbers continually bad and plants just now awakening from long idle periods, suppliers are particularly vulnerable to financial trouble. Seat supplier Lear Corporation failed to pay a $38 million obligation on June 1st, and the grace period has just run out. With
as its largest customer, and a significant amount of Blue-Oval business, as well, Lear's late 2008 gamble of borrowing $1.2 billion as a hedge against Detroit bankruptcy has proven difficult for the company to pay back. The supplier of seats and electronic components filed for Chapter 11 today in U.S. bankruptcy court for the Southern District of New York. The company hopes to operate business-as-usual while it restructures and plans to emerge from bankruptcy within 60 days.
Lear has been trying to find more diverse automakers to do business with besides the Detroit 3, but in the meantime, the seat and electronics manufacturer will reorganize and try to turn its fortunes around quickly. Investor Carl Icahn made a deal to buy out Lear shareholders a couple of years ago that might have prevented all this, but his deal was met with resistance over the price per share he was offering. Instead of the $37.25 per share Ichan was offering, current shares of Lear are likely to be worth a big old goose egg once Lear starts coughing up to it creditors. While some Lear seats may be very good at coddlng keisters, the company now has a lot of work to do to save its own ass.
- sub. req'd | Photo by Bill Pugliano/Getty]