Bankrupt American LaFrance Owes Creditors $200M+


 
 

Katy StechJohn P. McDermott | | Thursday, January 31, 2008


JEMS.com Editor s Note: For the JEMS.com exclusive on the bankruptcy, check out American LaFrance Files for Bankruptcy .

CHARLESTON, S.C. -- American LaFrance's bankruptcy filing Monday was set in motion last summer, when the ailing manufacturer of firetrucks and other emergency vehicles officially severed ties with former owner Freightliner.

It was in June that Freightliner, under a 2005 agreement, stopped tracking inventory, accounting, payroll and the manufacturing process for its former subsidiary.

But American LaFrance, which was preparing to take over those functions by creating its own in-house system, fumbled the changeover. The system it set up with the help of a technology contractor had "serious deficiencies" that had "a crippling impact" on the company's operations, according to documents filed with the U.S. Bankruptcy Court in Delaware.

That setback, combined with other business challenges, forced American LaFrance to seek protection early Monday from its more than 1,000 creditors, who collectively are owed more than $200 million.

In a statement, the manufacturer, which traces its roots to 1832, said it plans to keep its new Summerville plant operating while it restructures its finances and business.

"A bankruptcy is about a company reorganizing itself so it can correct its financial problems and be a stronger company in the future," the statement said.

American LaFrance said it plans to recall by March 10 the local production workers who were furloughed in December, bringing its companywide payroll to about 800 employees. A Sanford, Fla., plant that makes ambulances will be shuttered.

The creditor with the most at stake is American LaFrance's owner of slightly more than two years. New York-based Patriach Partners has pumped more than $150 million into the business and installed new management in October but has refused to provide any more funding unless the company agreed to declare bankruptcy, American LaFrance said.

Patriarch's chief executive officer, Lynn Tilton, has declined several interview requests from The Post and Courier in recent weeks. American LaFrance officials refused to take questions Monday during a conference call.

The company said in its written statement that it is seeking $50 million in fresh financing from Patriarch and that it hopes to emerge from the bankruptcy process within 90 days, which would be a speedy turnaround.

A restructuring firm, Corporate Revitalization Partners, has been retained to get the business back on its feet.

Under the reorganization plan, American LaFrance will try to honor employee wages, warranty claims and vehicles that were purchased with performance bonds, according to the statement.

Last year, the manufacturer lost more than $56 million on sales of more than $195 million, according to company filings.

The problem-riddled transition to its own computer system from Freightliner's did not help. The two systems were not entirely compatible, and a wide range of financial information was lost in the changeover. Inventory was in disarray, and workers were unable to find the parts they needed.

"This, in turn, severely limited ALF's ability to deliver completed products to its customers," the company said in its court filing. The manufacturing delays hurt cash flow and eventually "created a liquidity crisis."

American LaFrance encountered other problems, as well. A month after the systems switch began, the company relocated its local operations from North Charleston to a new plant and headquarters near Summerville. The move slowed production and created a new set of logistical problems that hurt the bottom line, the company said.

Meanwhile, the market for American LaFrance's mainstay product, emergency vehicles, is depressed. And new emissions requirements that took effect last year forced the company to retool its engineering plans.

"At current levels of revenue, ALF has insufficient cash to support ongoing operations," the company said in its filing.

Gatch Electrical Contractors Inc. is one of many businesses snared in American LaFrance's financial woes. The West Ashley company helped install electrical systems at American LaFrance's new plant and is owed $101,278 for the work, according to a lawsuit it filed.

"It's not going to put us out of business, but $102,000 is a lot of money," owner Jimmy Gatch said, adding that he's never had to sue a customer before.

The bankruptcy also could affect residents of Lamar County, Miss. In September, Lamar placed a $1.9 million order for 10 American LaFrance firetrucks, expecting them to arrive later this year to help keep fire protection services on pace with the area's growing population, county administrator Chuck Bennett said.

"We're not terribly hurt if it's delayed a bit ... but, yeah, we'll be disappointed," he said.

Reach Katy Stech at 937-5549 or kstech@postandcourier.com Reach John P. McDermott at jmcdermott@postandcourier.com or 937-5572.


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