Findlay Industries, one of North America's largest privately held auto parts makers, is attempting to sell its European business to raise cash to keep its troubled US operations afloat.
The proposed auction of that business, Findlay Industries Deutschland, a supplier to BMW and Volkswagen, could raise between $70 million and $100 million (E78.5 million to E112 million) to help Findlay relieve pressure from its bank group, say industry sources familiar with the effort.
The funds are needed urgently, the sources say, because Findlay has fallen out of compliance with the terms of its bank loans. According to these sources, the banks have given Findlay only until the end of the year to return to compliance.
Although it is a relatively small, family held company, Findlay's troubles are familiar to the supplier sector as a whole. Declining sales to the automakers are putting suppliers' profits under pressure. At the same time, they're burdened with big debt to pay for expanded capacity and acquisitions they no longer need.
Federal-Mogul and Canadian supplier A.G. Simpson filed for bankruptcy protection in September. And several of the sector's biggest companies posted dismal earnings results for the third quarter and warned of more pain to come.
'Many suppliers simply do not have the wherewithal to survive, let alone prosper,' in the current climate, said analyst Michael Heifler of Bear, Stearns & Co. Inc. of New York.
Findlay's European operation, which posted sales last year of nearly E225 million, operates seven plants in three countries. It produces headliners, door trim, seat backs and package trays.
In North America, Findlay supplies assembled seats to Tier 1 supplier Johnson Controls for the Chevrolet TrailBlazer, Oldsmobile Bravada and GMC Envoy.
Like much of the rest of the industry, Findlay Chairman and founder Philip Gardner followed a familiar business model - get big fast and go global. Over 42 years, he expanded Findlay to 24 plants in Europe and North America, employing 5,000. Much of that growth has taken place since 1997, when he expanded into Europe.
Sales last year jumped 61 percent to $845 million, ranking Findlay 71st on the Automotive News Europe list of top original equipment suppliers to North America.
Gardner declined requests to be interviewed.
US carmakers have begun cutting production to cope with weaker sales, but the capital spending and acquisition trend of the 1990s has hit suppliers. Many of them, such as Findlay, have been unable to pay the debt they used to pay for expansion and acquisitions without selling assets.
Findlay is very private and provides no financial details. But the 1997 decision to expand into Europe required big help from banks.
Sources close to the company say it posted a loss last year of more than $10 million from its North American operations, although the European business is said to be profitable.
Findlay began hurting even before the slowdown. It is heavily dependent on sales to manufacturers of big trucks, a segment that turned sharply lower last year. It supplies interior trim and sleeper cabs to Freightliner, Volvo and International Truck and Engine, all of which have slashed production.
Findlay also has been under intense pricing pressure from its Tier 1 customers.