dura auto files for bankruptcy

the us motor industry is really having it bad. chinese cars to hit europe soon at the half price of equivalent models. and they look good too.

more motor job losses to follow but this time it'll be europe in general.

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Dura Auto Files for Bankruptcy as Parts Demand Falls (Update4)

By Jeff Bennett and Tom Becker

Oct. 30 (Bloomberg) -- Dura Automotive Systems Inc. filed for bankruptcy today, becoming the fifth major U.S. auto-parts company since February 2005 to seek protection from creditors.

Dura, a maker of parking brakes, door hinges, seat recliners and other parts, listed liabilities of $1.73 billion and assets of $1.99 billion in papers filed with the U.S. Bankruptcy Court in Delaware. The company said it was forced to file for Chapter 11 because of North American production cutbacks by U.S. automakers and rising costs for raw materials such as steel.

The filing is the latest woe for the U.S. auto industry. Ford Motor Co., General Motors Corp. and Chrysler posted combined third-quarter losses of $7.4 billion as they continued to lose sales and market share to Japan's Toyota Motor Corp.

``Dura finally threw in the towel,'' said Pete Hastings, an analyst with Morgan & Keegan & Co. ``Several of the weaker suppliers have already folded, but they will re-emerge through the magic of bankruptcy after they shed the high labor costs, heavy debt burdens and overly aggressive sales contracts.''

The filing covers Dura's U.S. and Canadian operations and comes after the company missed a $17.3 million interest payment on Oct. 16. The bankruptcy process will be used to consolidate operations, close plants and exit ``burdensome'' contracts, the company said.

Ford and GM, Dura's largest customers, said they didn't expect their production to be affected by the partsmaker's bankruptcy.

Funding

Dura has arranged for about $300 million in loans from Goldman Sachs, GE Capital and Barclays so the company can continue to operate. Dura will seek bankruptcy approval to access $50 million of that loan during its first court hearing.

``The entire North American automotive supply industry is at an extremely difficult juncture,'' Dura Chief Executive Officer Larry Denton said in a statement. ``Pursuing a financial reorganization under court protections is the prudent course of action.''

Dura's 8.625 bond due in April 2012 fell 3.5 cents to 29.5 cents on the dollar today, yielding 43.6 percent, according to Trace, the NASD's bond-price reporting service. The debt was today's most actively traded bond, Trace data show.

Dura shares rose 4.5 cents to 29 cents at 9:52 a.m. New York time in Nasdaq Stock Market composite trading.

The partsmaker posted a $138.3 million loss in the first half of the year, after profit fell 85 percent in 2005 and 48 percent in 2004.

Production Cutbacks

Ford is cutting second-half North American output 16 percent from a year earlier. GM is trimming 10 percent, and DaimlerChrysler AG's Chrysler will reduce production as much as 17 percent. Fewer cars and trucks being built means fewer vehicles needing Dura parts.

Denton has said he plans to close 10 plants and trim labor costs by shifting 2,000 jobs from high-cost to low-cost countries to revive earnings. The case has been assigned to U.S. Bankruptcy Judge Kevin Carey.

Dura, based in Rochester Hills, Michigan, joins Tower Automotive Inc., Collins & Aikman Corp., Dana Corp. and Delphi Corp. in seeking bankruptcy protection over the past year and a half. Of those partsmakers, Dura's is the second smallest by assets. All cited falling demand from GM and Ford as a cause for having to reorganize. The automakers began reducing North American production in 2004's second half because of slowing sales.

Dura's History

Dura was formed in 1990 and expanded from making parking brakes to producing pedals, doors, windows, seat components, steering parts and other products. It bought 19 companies or units of other companies from 1994 through 2003, increasing sales 10-fold while piling up debt to make the acquisitions. Sales were $2.34 billion in 2005.

The company posted one annual loss from 1997 through 2004 and 18 consecutive quarterly profits beginning in 1997. It began showing signs of financial strain at the start of 2005 as the automakers cut back. Ford, GM and Chrysler accounted for about 37 percent of Dura's revenue last year, court documents show.

``We do not expect any disruption in supply and they have assured us that they will maintain normal operations throughout this restructuring,'' said GM spokesman Tom Hill. He said GM's purchases from Dura include parking brake levers and cables, steering columns and pedal assemblies.

Ford spokesman Paul Wood said the automaker continues to ``work closely with Dura to ensure there are no disruptions at our assembly plants.''

Creditors

The company's largest unsecured creditor was U.S. Bank Corporate Trust Services, a unit of U.S. Bancorp, with a claim of $523 million, according to the filing. The bank is trustee for Dura's 9 percent notes.

The cost of raw materials has risen in the past two years, further reducing Dura's profitability. Steel prices more than doubled from 2003 to 2005, and resins used in plastic parts have also become more expensive.

Denton announced a restructuring he called ``50-Cubed'' in February 2006. Under the plan, 50 percent of the company's sales would come from low-cost plants, and earnings before taxes would increase by 50 percent by 2008. The job changes and factory shutdowns were part of the restructuring.

Denton surprised Wall Street analysts on July 27 when he reported a second-quarter loss of $131.3 million, compared with a $2.96 million profit a year earlier. Denton blamed higher spending for materials and an unidentified automaker scra pping a contract during the quarter. The company's shares dropped 56 percent that day. They traded as low as 21 cents on Oct. 18 and finished last week at 29 cents.

On Aug. 15, the company said it had hired the turnaround firm Miller Buckfire for advice on how to handle its debt. On Aug. 28, the company hired a second consultant, Glass & Associates, to help shrink its operations.

The case is In re: Dura Automotive Systems Inc., No. 06- 11202, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporters on this story: Jeff Bennett in Southfield, Michigan at [email protected] ; Tom Becker at U.S. Bankruptcy Court in New York at [email protected]

Last Updated: October 30, 2006 09:57 EST