Longtime Michigan Automaker Files For Bankruptcy
The Detroit critics and bashers have finally gotten their wish, the bankruptcy of a legendary domestic auto nameplate. The UAW doesn't get much lovin', so no doubt there will be some schadenfreude over obstinate union members refusing to negotiate concessions, driving their employer into filing for bankruptcy protection from their creditors. Okay, so maybe the automaker in question is based in Kalamazoo, not Detroit, Auburn Hills or Dearborn, and to be precise it hasn't built any cars for at least 25 years. However Checker Motors Corp. still exists as a corporate entity and last week that corporation filed for Ch. 11 reorganization in U.S. Bankruptcy Court in Grand Rapids.
Checker Motors Corp., started making cabs in Kalamazoo in 1922. Though it stopped production on its iconic Checker sedan and cab in 1982 rather than give in to labor demands at the time, it has continued on as a vendor to the Detroit automakers, supplying them with body and chassis components. The 87-year-old company has 246 employees with assets of $24.5 million and liabilities of $21.8 million. Checker posted net sales of $63.4 million in 2007.
During the debate over federal loans to the domestic automakers, a number of analysts predicted that if any one of the three automakers declared bankruptcy, the other two would have to follow suit. Bankruptcy allows the abrogation of labor contracts and an automaker in Ch. 11 proceedings would be able to lower labor costs significantly, putting the other car makers at a competitive disadvantage. If GM filed for Ch. 11, Ford would almost be forced to do so just to stay competitive.
That's exactly what has happened to Checker. Checker is the eighth major US auto supplier that has filed for bankruptcy in the past year. One reason Checker cited in their bankruptcy filing is a need to have wages that are competitive with other suppliers already in bankruptcy proceedings. The company tried to negotiate wage concessions from its employees' labor union but even with bankruptcy hanging over their heads, the union wouldn't make the needed concessions.
The bankruptcy filing also cited the decreased market shares of its customers. Checker sells stampings and welded assemblies to all three of the domestic automakers and the domestics have lost about 5% market share from 2007 to 2008. I suspect that the 35% decline in overall sales is a great factor than decreased market share.
Supporters of government assistance to the domestic automakers were called Cassandras for predicting a cascade of supplier bankruptcies should any of the domestics be forced into Chapter 11 or 7. With at least 1/3rd of domestic auto suppliers already financially distressed, it may not even take a failure of one of the large automakers to start that cascade. The same day that Checker filed, Lansing based automotive electronics supplier May & Scofield closed its doors after Bank of America foreclosed on its U.S. assets.
Checker Motors Corp., started making cabs in Kalamazoo in 1922. Though it stopped production on its iconic Checker sedan and cab in 1982 rather than give in to labor demands at the time, it has continued on as a vendor to the Detroit automakers, supplying them with body and chassis components. The 87-year-old company has 246 employees with assets of $24.5 million and liabilities of $21.8 million. Checker posted net sales of $63.4 million in 2007.
During the debate over federal loans to the domestic automakers, a number of analysts predicted that if any one of the three automakers declared bankruptcy, the other two would have to follow suit. Bankruptcy allows the abrogation of labor contracts and an automaker in Ch. 11 proceedings would be able to lower labor costs significantly, putting the other car makers at a competitive disadvantage. If GM filed for Ch. 11, Ford would almost be forced to do so just to stay competitive.
That's exactly what has happened to Checker. Checker is the eighth major US auto supplier that has filed for bankruptcy in the past year. One reason Checker cited in their bankruptcy filing is a need to have wages that are competitive with other suppliers already in bankruptcy proceedings. The company tried to negotiate wage concessions from its employees' labor union but even with bankruptcy hanging over their heads, the union wouldn't make the needed concessions.
The bankruptcy filing also cited the decreased market shares of its customers. Checker sells stampings and welded assemblies to all three of the domestic automakers and the domestics have lost about 5% market share from 2007 to 2008. I suspect that the 35% decline in overall sales is a great factor than decreased market share.
Supporters of government assistance to the domestic automakers were called Cassandras for predicting a cascade of supplier bankruptcies should any of the domestics be forced into Chapter 11 or 7. With at least 1/3rd of domestic auto suppliers already financially distressed, it may not even take a failure of one of the large automakers to start that cascade. The same day that Checker filed, Lansing based automotive electronics supplier May & Scofield closed its doors after Bank of America foreclosed on its U.S. assets.
Labels: Bankruptcy, Checker
posted by Ronnie Schreiber at 2:04 AM 
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