Still Winning Business

A bankrupt supplier has an uphill battle trying to win new business. Rightfully so, the customer has to wonder about long-term viability.

So Tower Automotive Inc. trumpets a contract it won with Ford Motor Co. after the supplier's Feb. 2 Chapter 11 filing.

Convincing Ford that bankruptcy would not result in any supply disruption was not difficult, says Bill Pumphrey, president of Tower's North American Operations.

“We told them, ‘Here is the plan. It is a good plan to ensure continuation of supply,’” he says. “We continued to be cost competitive, and the facilities are performing to the expectations of our customers.”

Tower, of Novi, MI, claims to be the world's No.1 independent producer of automotive body structures but landed in bankruptcy after an acquisition binge that began in 1994. Its hunger for deals extended around the world, as the company gobbled up or paired with companies in South Korea, Canada, Italy, Germany, Mexico, Brazil and Slovakia. In total, Tower closed 15 deals between 1994 and 2000.

Saddled with overwhelming debt, increased steel prices and lower production volumes for Big Three vehicle programs, Tower says Chapter 11 was necessary to reorganize its finances.

Despite the filing, Tower says it has won a body structures program with Ford that will require a new facility in the U.S. in 2007.

Shortly before bankruptcy, Tower also won a contract to supply a large assembly for a different OEM. Pumphrey declines to identify the customer. Tower's existing plant in Plymouth, MI, will produce the assemblies.

Existing machinery in the Plymouth plant will be used. Employees, represented by the United Auto Workers, currently produce engine and transmission cradles for General Motors Corp. and frames for Chrysler Group.

For the Ford job, Pumphrey says Tower is seeking a site in the South. The new facility will be used strictly for assembly. Tower also will invest in a large transfer press to support the business, but the machinery will not be located in the new plant. “We may have a new facility for that as well,” he says.

It makes sense to keep the operations separate so the transfer press can be used for other business, Pumphrey says.

Tower already derives about 60% of its North American sales from Ford.The relationship with Ford appeared rocky in 2002 when Tower announced it was dropping out of the bidding to supply the frame for the '06 Ford Explorer.

Tower complained at the time Ford's cost targets made the Explorer program unprofitable. Until recently, Tower produced the frame for the current Explorer, but Magna International Inc. will produce the undercarriage for the '06 model.

In its bankruptcy case, Tower is preparing a plan of reorganization. As part of the plan, Tower announced the closing of plants in Belcamp, MD (serving GM, primarily Saturn); Bowling Green, KY (e-coat paint shop); and Corydon, IN (Explorer frames), as well as downsizing in Granite City, IL. In total, the cuts eliminated 800 jobs.

The planning is expected to be completed in the fall. How soon Tower emerges from Chapter 11 depends on how soon it can carry out its reorganization plan.

Bo Andersson, GM vice president-worldwide purchasing, recently said the auto maker does not source new business to bankrupt suppliers.

Pumphrey says he knows Tower cannot use bankruptcy as an excuse to be less responsive. “Customers have said, ‘We need a strong Tower Automotive.’ We have their support. But they've made it abundantly clear we have to perform.”