Plastech is working on bankruptcy financing to keep the company afloat through the summer. However, instead of going to traditional lenders, they're going hat-in-hand to their customers for an $80m line of credit. The Detroit Free Press reports Johnson Controls, Inc. (JCI), GM, FoMoCo and Chrysler are expected to share the pain to ensure a steady flow of plastic parts to their assembly plants through the summer. Experts say the loans are a smart move, as the cost of the loan would be less than the cost of stopping an assembly line due to a parts shortage. At the same time, some of Plastech's other lenders are talking with JCI about the possibility of them buying Plastech's interior component operations. Plastech is preparing its customers for the possibility they could go out of business by building a bank of parts. Watch this space as the continuing soap opera unfolds.
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Ah good ole Posner CB – when I studied law / economics, Posner’s maximization of aggregate wealth was his train of thought.
Johnson Controls & Plastech – are akin to 2 drowning swimmers next to each other – as with human nature they embrace each other and drown together faster than trying to tread water on their own – GM is sitting near them on the bottom wearing cement boots, a snorkel with a garden hose that periously reaches the surface and big ole Wagoneer blinders – hallucinating as to how the world revolves around his company.
Johnson Controls & Plastech – are akin to 2 drowning swimmers next to each other – as with human nature they embrace each other and drown together faster than trying to tread water on their own
Why do say that? JCI is/was one of the few suppliers in good financial health. Perhaps their building automation business is subsidizing the automotive group at this point.
At least JCI has consumer product (they supply Interstate Batteries) and isn’t totally dependent on sagging automakers’ (mis)fortunes.
If I didn’t know any better, I’d call that extortion. “Loan me money… or your plant gets it”.
Posner 101: In a shrinking market with hint of recession – no one is safe…even JCI. For instance if you look at AA they were healthy and tried to get concessions as their competitors were doing and a 5 week strike results – their financials and debt after this will turn them into an ailing parts maker.
With my analogy – JCI is currently treading water and doing fine by themselves but if they hook up with Plastech assume a lot of the debt and UAW labor it will remove even more flexibility – and with the post bankruptcy parts makers (i.e. leaner and UAW’s death grip on the family jewels lessened) being much more competitive and new leaner non union workshops and Chinese or Mexican parts makers, JCI will eventually hit the skids. It was like GM buying Saab – ailing automaker same industry – maturing market – look how that turned out.
Ah…. good old fashioned extortion with menaces!
Have Plastech execs been to England to see the private wheel clampers at work?!
Ugh – Johnson Controls…bastards won’t open up the Homelink product to wider distribution. I hope they loan Plastech tons and lose it all. Then they’ll start whoring out Homelink at every BestBuy and Circuit City in the US.
I guess just like the car companies, the readers of the site don’t like Johnson Controls becasue they know how to run a business, unlike all the others that have gone bankrupt.
Johnson Controls doesn’t take business for volume, they take it to make a profit. The last time I checked, GM, Ford, Chrysler, Delphi, Vistion, AAM, just to name a few were all loosing money, and JCI posted record profits. Is that bad? Not if you are an employee or stockholder.
Other comments aside (some quite negative) – when an industry gets hit hard from all sides…even the brightest stars are dimmed and threatened. JCI buying into Plastech’s business is a bad move (at least in IMHO).
GM Ford and Chrysler may have finally caught on that its not in their best interest to screw over their suppliers to the point of bankruptcy. Also its harder to put a gun to someones head and say lower the price when the supplier is very profitable and there are fewer competitors left. A profitable supplier doesn’t have to take a bad deal.