Collins & Aikman [CKC] has filed for bankruptcy protection.
I don't think I'd go anywhere near a non-Japanese auto sector corp.
CHICAGO, May 17 (Reuters) - Auto parts maker Collins & Aikman Corp. and most of its U.S. units filed for bankruptcy protection on Tuesday as it confronts a mounting cash crunch caused partly by production cuts at auto makers.
Collins & Aikman, which supplies cockpits and other parts for interiors to the Big Three U.S automakers -- General Motors , Ford and DaimlerChrysler -- said it has obtained commitments for up to $300 million in debtor-in-possession financing to continue operations without interruption.
The company, based in Troy, Michigan, said no affiliates outside the United States were included in the filing, which was widely expected.
Unlike competitors such as Delphi , Collins & Aikman produces basic parts that do not command premium prices. In addition to production cuts by Ford and GM, rising materials costs and high debt assumed for acquisitions have contributed to Collins & Aikman's problems.
Tuesday's filing in the U.S. Bankruptcy Court for the Eastern District of Michigan marked the third major bankruptcy in the auto parts sector in recent months. It followed filings from Tower Automotive Inc. and closely held Meridian Automotive Systems Inc. Other parts makers sought court protection last year.
"You can expect months of messy bankruptcy proceedings and it is uncertain whether (Collins & Aikman) will be able to reorganize itself or have to liquidate," Morningstar analyst John Novak said.
The company said it believed it could successfully restructure.
"What the company will look like at the end of the road, it is just too early to say; no creditor's committee has been formed, we are just hours into the process," Sandra Sternberg, a company spokeswoman, told Reuters.
Collins & Aikman plans to restructure its debt, but has not released a timetable for completing its reorganization. It has no immediate plans for job cuts, company spokesman David Youngman said.
The company has about 23,000 employees worldwide, with about 12,000 in the United States.
Standard & Poor's analyst Martin King said that reduced light vehicle production, increasing costs for materials such as petroleum-based resins and the discontinuation of customers' accelerated payment programs intensified stress the company experienced from poor cash flow in recent years.
BASIC PARTS A CHALLENGE
Morningstar's Novak said he would not expect to see much of an impact on automakers in the near term, distinguishing between suppliers that produce more highly valued parts and those that make parts that can be obtained more cheaply.
"It is certainly indicative of the problems for suppliers that make basic commodity parts and have heavy Big Three exposure," he said. "The whole sector may experience pressure, but for the strong firms ... it is not going to end this way."
Collins & Aikman said JPMorgan Chase has committed to provide up to $300 million of the so-called DIP financing and has agreed to provide funding to support the non-U.S. operations as well.
The company said it plans to ask for interim approval for up to $150 million of financing.
Financing, as well as cash from operations, is expected to provide sufficient liquidity for Collins & Aikman to meet expenses such as supplier obligations, wages, salaries and benefits, the company said.
Last Thursday, analysts said bankruptcy appeared almost inevitable for Collins & Aikman after it warned of significant near-term liquidity problems and said Chief Executive David Stockman, former budget director under President Reagan, had resigned.
Textron Inc. , a conglomerate that sold a business to Collins & Aikman, said that it is assessing exposure to the bankruptcy, but believes $39 million of preferred stock it holds in the parts maker likely will have little value.
Collins & Aikman's largest shareholder, Heartland Industrial Partners, in March agreed to buy a majority of preferred shares in Collins & Aikman that Textron held, with an option to buy the rest.
The parts maker said it retained Kroll Zolfo Cooper as financial adviser and named Kroll's John Boken as chief restructuring officer. It has retained Kirkland & Ellis as restructuring counsel and Lazard as its investment bank. (Additional reporting by Emily Chasan in New York)
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