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Auto supplier Lear files for Chapter 11

“What we have seen is a drop-off that has outpaced ... suppliers’ ability to cut costs,’’ a Lear attorney said. “What we have seen is a drop-off that has outpaced ... suppliers’ ability to cut costs,’’ a Lear attorney said. (Bill Pugliano/ Getty Images)
By Dan Strumpf
Associated Press / July 8, 2009
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NEW YORK - Automotive parts supplier Lear Corp. filed for bankruptcy protection yesterday 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 bankruptcy protection from its creditors. The Southfield, Mich., company made the filing in the US Bankruptcy Court for the Southern District of New York.

It listed $1.27 billion in assets and $4.54 billion in liabilities. Subsidiaries outside the United States 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,’’ said chief executive Bob Rossiter.

Under Chapter 11 reorganization, a company can stay in operation under court protection while it sheds debts and unprofitable assets.

Lear attorney Marc Kieselstein said the company plans to file a plan of reorganization in the next 30 to 60 days.

He said the company has support for its reorganization from the majority of its debt-holders.

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 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 have has dealt a particularly hard blow to the auto supply base.

Lear has been particularly hard hit by the slump. It is heavily dependent on the struggling North American and European auto markets, with 36 percent of its sales coming from North America and 49 percent coming from Europe.

Lear, which posted $13.6 billion in sales for 2008, is a key supplier for both GM and Ford. The pair represent the company’s two largest customers and account for a combined 40 percent of sales.

Lear said yesterday that it hopes for an “expedited’’ bankruptcy process. The parts maker said it has support from more than 50 percent of its bondholders and about 69 percent of its secured lenders for its reorganization plan.

It has asked the court to allow it to continue to pay workers and contribute to its US and Canadian pensions without interruption.

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