In re Plastech Engineered Products, Inc.

• Decision Date: 19 February 2008
• Docket Number: Bankruptcy No. 08-42417.,Adversary No. 08-4120.
• Citation: 382 B.R. 90
• Parties: In re PLASTECH ENGINEERED PRODUCTS, INC., et al.,<SMALL><SUP>1</SUP></SMALL> Debtors. Chrysler LLC, Plaintiff, v. Plastech Engineered Products, Inc., et al., Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Michigan

Page 90

382 B.R. 90

In re PLASTECH ENGINEERED PRODUCTS, INC., et al.,¹ Debtors.

Chrysler LLC, Plaintiff, v. Plastech Engineered Products, Inc., et al., Defendants.

Bankruptcy No. 08-42417.

Adversary No. 08-4120.

United States Bankruptcy Court, E.D. Michigan, Southern Division.

February 19, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Michael C. Hammer, Dickinson Wright PLLC, Trent B. Collier, Ann Arbor, MI, for Plaintiff.

Deborah L. Fish, Detroit, MI, Louis P. Rochkind, Southfield, MI, for Defendants.

Plastech Manufacturing Corporation, pro se.

LDM Technologies, Inc., pro se.

LDM Holding Canada, Inc., pro se.

MBS Polymet, Inc., pro se.

Plastech Exterior Systems, Inc., pro se.

Romulus, Inc., pro se.

Plastech Frenchtown, Inc., pro se.

Huron Plastics Group, Inc., pro se.

Patrick E. Mears, Grand Rapids, MI, for Intervenor.

OPINION DENYING (1) MOTION TO LIFT THE AUTOMATIC STAY; AND (2) MOTION FOR PRELIMINARY INJUNCTION

PHILLIP J. SHEFFERLY, Bankruptcy Judge.

I. Introduction

This opinion addresses a motion to lift the automatic stay under § 362 of the Bankruptcy Code filed by Chrysler, LLC and related entities (collectively "Chrysler"). The motion was heard on February 14 and 15, 2008. The motion was opposed by the Debtor, many of its secured creditors and the Creditors' Committee ("Committee"). A number of other parties also opposed some of the relief requested by Chrysler, but not all of it. Chrysler called four witnesses to testify in support of its motion and introduced Chrysler's Exhibits 1, 4, 5, 6, 10, 12, 13, 16, 18-20, 22-29 and 32. Chrysler and the Debtor introduced Joint Exhibits 100 through 113. The Debtor called four witnesses in opposition to the motion to lift stay and introduced Debtor's Exhibits I, V and X. The Court finds that all of the witnesses testified credibly. The Court also received into evidence Goldman Sachs' ("Goldman") Exhibits 1 through 5. By agreement of Chrysler and the Debtor and pursuant to an order entered on February 7, 2008, the record made by the parties regarding Chrysler's motion for relief from stay also serves as the record for Chrysler's motion for injunctive relief filed by it against the Debtor in adversary proceeding no. 08-4120. The Court has carefully considered the many briefs filed by Chrysler, the Debtor and various other parties in this case, as well as the testimony of the eight witnesses and the exhibits introduced into evidence. The following constitutes this Court's findings of fact and conclusions of law under Fed. R. Bankr.P. 7052 both with respect to the motion to lift stay in the bankruptcy case and the motion for injunctive relief in the adversary proceeding.

II. Jurisdiction

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(a) and 157(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (G), and (K).

III. Facts

Plastech Engineered Products, Inc. is a privately held entity engaged in business as a tier one automobile supplier and designer and maker of blow-molded and injected-molded plastic products primarily for use in the automotive industry. It has a number of subsidiary entities engaged in business in the same industry. (Plastech and its subsidiaries will be collectively referred to as the "Debtor.") The Debtor is the largest female owned company in Michigan and it is certified as a minority business enterprise by the State of Michigan. The Debtor has been in business since 1988. Its products include automotive interior trim, under-hood components, bumper and other exterior components and cock-pit modules. The Debtor's major customers are General Motors ("GM"), Ford Motor Company, Chrysler, and Johnson Controls, Inc. ("JCI") (collectively referred to as the "Major Customers"). The Debtor has 36 manufacturing facilities in North America and 2 corporate locations. The Debtor employs over 7,700 individuals. The Debtor's annual sales are approximately $1.2 billion to $1.3 billion. The Debtor has basically three levels of financing. There is a revolving credit facility with various lenders (collectively referred to as "Revolving Lenders"). There are first and second lien term loans involving various lenders (collectively referred to as "First Lien Term Lenders" and "Second Lien Term Lenders").

Recent developments in the domestic automotive market combined with the rising prices of certain commodities have put a strain on the Debtor's liquidity position in recent years. Further, the decline of overall sales in the domestic automotive industry has created certain over capacity in the automotive industry worldwide, resulting in increased competition among automotive suppliers such as the Debtor, intensifying the pressure upon them to remain competitive.

In February, 2007, the Debtor entered into a refinancing that created the revolving credit facility, the first lien term loan and the second lien term loan. Goldman served as the lead arranger, syndication agent and administrative agent for the refinancing. The revolving credit facility provided the Debtor with up to $200,000,000 of revolving credit subject to a formula and available collateral. The first lien term loan provided the Debtor with up to $265,000,000 of secured term debt. The second lien term loan provided the Debtor with up to $100,000,000 of additional secured term debt.

To assist it in obtaining the refinancing, the Debtor received commitments from the Major Customers to provide the Debtor with certain financial accommodations. On February 12, 2007, the Debtor entered into a Financial Accommodation Agreement ("First Accommodation Agreement") (J. Ex. 104) with the Major Customers. The recitals to the First Accommodation Agreement stated that the Debtor had advised the Major Customers that it was attempting to effectuate a refinancing, that Goldman was serving as the lead arranger, syndicate agent and administrative agent for the refinancing, that the Debtor needed the Major Customers to provide certain financial accommodations in order to obtain the refinancing, and that the Major Customers agreed to provide such financial accommodations by depositing funds in an account with Goldman to be released to the Debtor simultaneously with the closing of the refinancing. The First Accommodation Agreement provided that the Major Customers would deposit $46,000,000 in the account with Goldman. That $46,000,000 was allocated among the Major Customers based on their respective levels of production of parts by the Debtor. Chrysler's share was $6,900,000. This was not an advance payment on any accounts receivable owing by Chrysler to the Debtor, nor was it a payment that Chrysler was contractually obligated to make to the Debtor. Instead it was a deposit provided by Chrysler to contribute to the Debtor's liquidity and enable the Debtor to obtain the refinancing. In exchange for this accommodation, the Debtor provided the Major Customers with various rights under the First Accommodation Agreement.

By the time the parties entered into the First Accommodation Agreement, the Debtor had been transacting business with Chrysler for approximately ten years. At that time, Chrysler's business was approximately 13% of the Debtor's overall sales volume and approximated $200,000,000 annually. Over that ten year period, Chrysler had paid the Debtor approximately another $167,000,000 for tooling. The Debtor produced approximately 500 component parts for Chrysler using approximately 3,000 tools. The parts include interior, exterior and power train components. When the First Accommodation Agreement was made, there already existed several executed documents governing the relationship between Chrysler and the Debtor. Chrysler's standard purchase order (Chrysler's Ex. 1) contains certain terms and conditions and also references and incorporates Chrysler's general terms and conditions and provides the Internet address to. Chrysler's website on the face of the purchase order to refer to those general terms and conditions. The general terms and conditions (J. Ex. 100) provide in paragraph 1 that the purchase of goods by Chrysler from a supplier is governed both by the purchase order and the general terms and conditions. Paragraph 20 of the general terms and conditions authorizes Chrysler to terminate any or all of its purchase orders with the Debtor, at Chrysler's option, without cause, upon 30 days written notice to the Debtor. Paragraph 21 of the general terms and conditions authorizes Chrysler to cancel any or all of its purchase orders in the event of certain specified defaults, some of which require 10 days written notice, but others of which do not require any written notice.

In addition to Chrysler's standard purchase orders and its general terms and conditions, on August 30, 2006, Chrysler and the Debtor entered into a long term productivity agreement (J. Ex. 101) that states that the Debtor and Chrysler "wish to supplement their existing contractual relationships with a long term productivity agreement" that would remain in effect until December 31, 2008. On the same day as the refinancing and the First Accommodation Agreement, February 12, 2007, Chrysler and the Debtor entered into an amended long term productivity agreement (J. Ex. 102). Like the original long term productivity agreement, the amended agreement provided that it would remain in effect through December 31, 2008. However, the amended long term productivity agreement contained a new provision in paragraph 2 stating that Chrysler "may not terminate for convenience." Paragraph 7 of the amended long term productivity agreement also added a provision allowing Chrysler to "resource" certain programs "immediately upon the occurrence of any Plastech responsible crisis." Both the original and the amended long term productivity agreements state that they prevail in the event of a conflict between them and the terms of any specific purchase orders.

The First Accommodation Agreement...