Wind Down of Auto Supplier Avoiding Counterclaims by OEMs

Johnson Rubber Company

Middlefield, Ohio

Challenge

Manufacturer of rubber products for Automotive industry. $50 million sales. $20 million debt. 113 year old company. 450 employees. Major Tier 1 supplier to Toyota, Honda, Ford, and others.

• After spending most of its 113 year history in industrial manufacturing supplying marine, bridge and other non-automotive companies, Johnson Rubber changed direction when it was sold and aggressively moved into the automotive rubber line, becoming a major Tier 1 supplier to Toyota, Honda, Ford, other others.
• Sales volume increased but margins were reduced.
• Capital intensive projects were undertaken at a time when there was evidence of unstable cash flow surfacing through irregularities in financial reporting and lender collateral reports.

Solution

• MorrisAnderson was retained to perform a Viability Analysis which uncovered errors on the company’s borrowing base certificate.
• Expanding their role, they took over the CFO’s duties, cash management, financial reporting and plant operations.
• MorrisAnderson terminated the SAP software program, corrected the borrowing base certificate, reissued corrected financial statements, eliminated unprofitable programs, and retained an investment banker to sell the company.

Results

• Major auto customers continued to source their business to other suppliers and the non-auto business did not produce enough volume to cover overhead.
• MorrisAnderson was tasked with winding down the company, which it did in 2 months in a manner which allowed Johnson Rubber to complete all commitments with customer resourcing, vendor payments and bank build of parts, and allowed employees to receive an extensive benefit package.
• MorrisAnderson ultimately was able to lessen the injury of the wind-down to the stakeholders, vendors and employees.