Layoffs loom at auto supplier

Officials at Blue Water Automotive Systems Inc. say anxious creditors and rising oil prices could lead the company to close down within 90 days, prompting approximately 1,400 layoffs, more than 200 of which would come from its plant just west of Howell.

Closure is the worst-case, and most likely, scenario, said James Sampson, president and chief executive officer.

"I don't want to give false hope, but I don't want hopelessness either," Sampson said, adding employees were being notified of their potential job loss late last week.

Fred Dillingham, executive director of the Economic Development Council of Livingston County, plans on meeting with Blue Water officials Thursday in Howell Township. Dillingham wouldn't disclose the nature of the talks.

"The situation is still very fluid," Dillingham said. "Things are very sensitive right now on several different fronts. Our role is to provide and identify everything that can be done form a local ... and state level to keep the company thriving in Livingston County."

Blue Water officials have had a rough time trying to sell the business.

Sampson said the most recent bid from a company interested in taking over Blue Water fell through Wednesday. A $16 million bid from Flex-N-Gate in Illinois was rejected after officials realized it would not satisfy their main creditor, CIT Group/Business Credit Inc., and its affiliate CIT Capital USA.

More than 40 objections to the bid officially were made to the bankruptcy court by the company's various creditors.

CIT estimates it holds $30 million in company assets, including buildings and equipment. The company makes plastic parts for the automotive industry.

Sampson said the company's creditors were paying closer attention to profit than worker livelihood.

Since filing for Chapter 11, Blue Water has struggled to find a way to get out of bankruptcy protection before Aug. 11, when it must submit an exit plan to the bankruptcy court.

In early June, NYX of Livonia made a bid for the company, which was rejected.

This month, General Motors Corp. initiated a lawsuit against Blue Water asking for $4.98 million in damages stemming from what the automaker characterized as breach of contract and unpaid bills.

With the Flex-N-Gate bid failing, Blue Water will start to be dismantled by its various creditors in 60 to 90 days. The company, Sampson said, was at the center of a "perfect storm."

The rising price of petroleum products smacked the company twofold.

First, American auto companies were unprepared for a shift in consumer preference, from large sport utility vehicles to smaller, more fuel-efficient models. Last year, U.S. car companies sold 15.8 million vehicles. This year, just 14.7 million are expected to be sold, Sampson said.

Second, Blue Water's main manufacturing component, oil-derived resin, saw a rise in price almost as dramatic as gasoline. Two years ago, the company paid 70 cents a pound for resin. This year, it's paying close to a dollar a pound.

Though going out of business is the most likely scenario, Sampson said two other situations are possible.

The business could condense, selling off some of its assets and retaining a number of employees, similar to what happened to Plastech's Port Huron facility.

Or, the company could receive another bid.

"It is still our hope that the players involved can agree to allow us to remain in business," Sampson said.

He said CIT long had given the ultimatum of "give me all my money or give me back all my buildings and machines."

"Well, now they might get a lot of empty buildings," Sampson said.

Contact Daily Press & Argus reporter Kristofer Karol at (517) 552-2835 or at kkarol@gannett.com.