Automotive parts supplier Lear Corp. filed for bankruptcy protection on Tuesday July 7, after receiving support from lenders and bondholders to reorganize its struggling business. The move had been expected from the maker of vehicle seats and electronics, which missed an interest payment on its bond debt last week and revealed its intention to seek Chapter 11 protection from its creditors. The company is based in Southfield, Michigan, and filed its petition in the U.S. Bankruptcy Court for the Southern District of New York. (The same forum as the Chrysler and GM bankruptcies). Lear's petition listed $1.27 billion in assets and $4.54 billion in liabilities. Subsidiaries outside the U.S. and Canada are not part of the filings, the company said. "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," CEO Bob Rossiter said in a statement.
The auto supplier's first court appearance was scheduled for 4 p.m. EDT Tuesday before U.S. Judge Allan Gropper in New York. Attorneys for Lear were slated to ask Gropper for approval of typical "first day motions" including permission to pay pre-bankruptcy wages, taxes and certain obligations to its customers. (Lear's "Reorganization" web page is reporting that the first day motions were approved on Tuesday). Under Chapter 11 reorganization, a company can stay in operation under court protection while it sheds debts and unprofitable assets. (For a more detailed discussion of Chapter 11 proceedings in general, see my blog entries at the National Bankruptcy Forum).
Lear is the first major automotive parts maker to seek court protection since Visteon Corp., the former parts arm of Ford Motor Co., filed in May. Auto parts suppliers have been hammered by the economic downturn as consumers continue to avoid buying cars and trucks and automakers slash production. The Chapter 11 filings by General Motors Corp. and Chrysler Group LLC and the idling of most of their factories has dealt a particularly hard blow to the auto supply base, and Lear has been particularly hard hit by the slump.
-Drew Broaddus