June 11, 2012: Allied Automotive Group filed for chapter 11 bankruptcy last night in Delaware. CEO Mark Gendregske held a conference call this morning, where he claimed that there will be “no reduction in workforce, pay, or benefits” and that the bankruptcy will be a short process compared to Allied’s 2005 bankruptcy.
Gendregske contrasted the bankruptcy to 2005, when Allied demanded Teamster concessions. He further stated there will be no changes in operations or deliveries, or delays in paychecks or payments to pension funds. He stated that employees’ 401(k) savings are unaffected.
The bankruptcy involves 18 (!) subsidiaries, including Axis, but not Allied’s Mexican and Bermudan subsidiaries. Allied has retained three law firms to represent them in court.
A month ago two Allied creditors, both hedge funds, went to court to try to force Allied into bankruptcy. Allied claims yesterday’s action will prevent those creditors from “taking control of our fate,” and will allow the company to reduce debt.
Allied attributes their problems to the 2008 economic collapse and the slow down in auto sales, and claims that the company is well positioned now that the auto industry is recovering.
What problem Allied will have getting parts and services from companies whose payments due will now be held up, remains to be seen. Anything Allied owed vendors, as well as lenders, prior to June 10 will be held up by this process.