Lear – the world’s 11th largest auto supplier by sales – has filed for Chapter 11 bankruptcy in a New York court. Like most auto suppliers, Lear has been hit hard by the collapse in new car sales, posting a net loss of $689.9 million last year. The company’s bankruptcy filing covers its operations in the United States and Canada.
Lear first suggested it could enter Chapter 11 bankruptcy last March with a missed $38 million bond payment on June 1st cementing the supplier’s place in bankruptcy court. Lear hopes to emerge from bankruptcy quickly, possibly in as little as 60-days.
“We are conducting business as usual and are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan,” Bob Rossiter, Lear CEO, said in a statement.
“Our goal is to emerge from this process quickly and with an appropriate capital structure to support our long-term business objectives as a leading global competitor with the financial flexibility to build on our strengths and take advantage of future growth opportunities.”
Lear’s customers include Ford and General Motors, the latter the supplier’s largest customer. GM’s business makes up about 23 percent of Lear’s business, good for $13.6 billion in sales last year, according to Automotive News.
Three years in the making
Although the recent collapse in new car sales pushed Lear over the edge, the firm has been on a steady decline for about the last three years. Lear has posted a net loss in three out of the last four years – including 2008’s $690 million loss – leaving the company’s finances in ruins. Lear borrowed its entire credit line of $1.2 billion late last year but to no avail.
In 2007 – before the market collapse – billionaire investor Carl Icahn offered Lear shareholders a buyout for $37.25 per share, but the company’s stakeholders declined. Richard Pzena, another investor, managed to convince bondholders that the company’s stock was worth about double that value. Lear shareholders will receive nothing for their stock holdings.
