US Auto Bankruptcies May Cost Steel Cos Nearly $69 Million-Documents
04 6월 2009 - 7:57AM
Dow Jones News
The bankruptcies of both General Motors Corp. (GMGMQ) and
Chrysler LLC will cost five steel companies a combined $68.78
million if the auto makers fail to pay their bills, according to
court filings from the two auto makers.
GM and Chrysler, the largest and third-largest carmakers in the
U.S., may owe even more money to steelmakers depending on whether
other steel producers filed claims that weren't disclosed among the
list of top 50 creditors in each of their bankruptcy filings.
Similarly, the figure may be lower in Chrysler's case as it started
to emerge from bankruptcy this week.
GM filed for Chapter 11 bankruptcy proceedings on Monday, making
it the second-largest company to do so in U.S. history. Chrysler
filed the same bankruptcy proceeding a month ago and is this week
finalizing plans to merge its assets with Italy's Fiat SpA (FIATY),
a move that will help pave the way for the U.S. auto maker to
emerge from bankruptcy.
The U.S. automotive industry is the second-largest steel
consumer in the U.S. followed after construction. The U.S.
automotive industry accounts for about 16% of total U.S. steel
shipments.
The two cash-strapped carmakers have suffered from decades of
cumbersome labor legacy costs and declining market share, but their
liquidity issues became more acute when sales plummeted due to lack
of consumer demand from the sudden economic downturn.
Steelmakers and component part suppliers have been among the
hardest hit by the bankruptcies and took action months ago to
conserve cash by slashing production, cutting jobs and shelving
expansion projects. But now both face the prospect of unpaid
bills.
In the steel industry, U.S. Steel Corp. (X), the U.S.'s
second-largest steelmaker by volume after Nucor Corp. (NUE), has
the largest exposure out of the steelmakers to the two
bankruptcies.
GM and Chrysler owe U.S. Steel a combined $25.77 million - $16.2
million from Chrysler and $9.6 million from GM.
A U.S. Steel spokeswoman declined to comment, noting that "we
don't comment publicly about our customers."
AK Steel Holding Corp. (AKS), the U.S.'s fifth-largest
steelmaker by volume, has the second-largest exposure among
steelmakers to the two auto makers: a combined $15.73 million.
AK Steel spokesman Alan H. McCoy said the company was confident
it would be repaid and said it is willing to supply steel to both
companies, although Chrysler has shut all of its automobile
production until sometime in June and GM plans to shut down
production for several weeks over the summer.
The U.S. units of ArcelorMittal (MT) and OAO Severstal
(CHMF.RS), the country's third and fourth-largest steelmakers, are
owed a combined $15.39 million and $6.69 million respectively,
according to the bankruptcy proceedings.
ArcelorMittal and Russia's Severstal wouldn't comment on the
bankruptcy proceedings but said they continue to value their
relationship with both carmakers.
Steel processing company the Worthington Steel Co., a unit of
Worthington Industries Inc. (WOR), was owed $5.20 million but only
from Chrysler, the least amount out of the five steel companies.
George Stowe, president of Worthington Industries, said Chrysler
has already paid back all its bills and his company is prepared to
do more business with Chrysler during the bankruptcy.
The steel companies are in a better position than other
creditors who have larger exposures to the two bankruptcies.
The Wilmington Trust Corp. (WL), trustee for the bondholders, is
GM's largest creditor with $22.76 billion in unpaid debt, followed
by union workers with $20.56 billion in employee obligations.
In Chrysler's case, Ohio Module MFG Co. LLC is the largest
creditor with $70.3 million in outstanding claims followed by
advertising company BBDO Detroit Inc with $58.1 million in
outstanding claims.
By comparison, U.S. Steel is the 13th and 31st-largest creditor
in Chrysler and GM's respective bankruptcy filings even though it
is considered the largest steel creditor in both cases.
The steel companies said they had already prepared themselves
for the bankruptcy proceedings by idling production and had already
taken steps to diversify their business over recent years in order
to reduce their exposure to the ailing U.S. automotive
industry.
-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328;
alex.macdonald@dowjones.com