DURA Automotive Systems, Inc. announced Monday that the company and its U.S. and Canadian subsidiaries have filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the District of Delaware. Operations outside of the U.S. and Canada, which account for 51 percent of the company’s revenue, are not part of the filing.
DURA opted to undergo restructuring under court protection as it will aid both its financial and operational restructuring.
DURA has arranged for $300 million in Debtor-in-Possession financing from Goldman Sachs, GE Capital and Barclays, which will be used to fund normal business operations.
“With industry conditions tightening further, we concluded that our capital structure is no longer appropriate,” said Larry Denton, chairman and CEO of DURA. “The Chapter 11 process will enable us to work with our creditors on a plan that will reduce our debt burden and align the business to meet the challenges of tomorrow’s automotive marketplace.”
According to a recently released report on Automotive Parts Suppliers, foreign automakers are increasing their North American vehicle production but the Big Three are reducing output. That reduction, when combined with price increases for raw materials, has been hurting parts suppliers.
Some of the main obstacles that suppliers are tying to overcome to improve their performance are: high raw material and energy costs, vehicle manufacturers are trying to cut costs, and heavy competition bringing down profit margins, the report says.
Moreover, the suppliers’ profitability has been affected by the shift of the production mix of vehicles from light trucks to passenger cars. Light trucks have higher dollar content and stronger profit margins. That trend is anticipated to continue through the rest or 2006, the report notes.