Swedish auto supplier Plastal has filed for bankruptcy, citing a “severe liquidity crisis” due to problems in both the auto industry and distressed financial markets.
The filing at the district court in Mölndal, Sweden, affects the parent company, but president and CEO Roar Isaksen said that it is “unavoidable” that Plastal’s operations in other countries will follow its lead. - We have turned over every possible stone in our attempt to avoid this situation, but today our last efforts failed - he said.
Plastal’s majority shareholder, Nordic Capital Fund, put more cash in the company in January, but the size of the auto industry’s decline – a 40% manufacturing drop just in the first two months of 2009 – was too big to maintain.
Plastal, based in Kungälv, Sweden, has 6,000 employees and 30 production facilities in 10 countries in Europe and China. It had sales of €1.3bn in 2008. It injection moulds bumper fascia, interior and exterior auto parts, including door panels for the Smart mini car, made in Hambach, France. It purchased German competitor Dynamit Nobel Kunststoff in 2005, more than doubling its size.
The court will appoint bankruptcy trustees for each Plastal group, the company noted in its news release. Deliveries to its Swedish plants have been suspended, but parts will be shipped to customers, if customers can assume freight costs.
- The drop in demand has been both unexpectedly sudden and large towards the end of last year, and continued in the beginning of this year - said chairman Curt Germundsson. - The consequences have been more severe than anyone could have predicted. The current market conditions continue to be extremely uncertain and it has therefore not been possible to find a sufficient long term solution for Plastal.
Plastal will likely not be the last European supplier forced into bankruptcy. While the European auto industry is in marginally better condition than the North American industry because of its wider range of automakers, it is still seeing large cutbacks.
- It is a global industry and [suppliers] are affected by everything that happens - said Antonio Ferreira, manager, European supply chain and technology forecasts for consulting group CSM Worldwide, based in Byfleet, England.
While traditional carmakers in Italy, France or Germany may be financially stable, General Motors and Ford Motor also have a huge presence in Europe, and European suppliers to those companies are as tightly linked to its fate as North American suppliers.
- Even this morning, I was talking to a supplier and he was watching the news minute-by-minute trying to figure out what’s going to happen to GM - Ferreira said. - Everyone is saying the same thing, it’s a storm, and we’re trying to be proactive as we can and ride it out for as long as we can’.
Some speciality plastics suppliers with technology or parts that are in demand, but the bulk of the companies are firms like Plastal, and are in a very competitive field with little profit even when times are good, he said. Those businesses are taking the biggest hits.
- This is probably one of the most competitive markets that I’m aware of, and even without the downturn there had to be some consolidation - he said.
Bankruptcy of Plastal