Winddown of Auto Supplier Avoiding Counterclaims by OEMs

The Situation

Manufacturer of rubber products for the Automotive industry. $50 million in sales. $20 million debt. 113-year-old company. 450 employees. Major Tier 1 supplier to Toyota, Honda, Ford, and others.

After spending most of its 113-year history in industrial manufacturing supplying marine, bridge, and other non-automotive companies, Johnson Rubber changed direction when it was sold and aggressively moved into the automotive rubber line, becoming a major Tier 1 supplier to Toyota, Honda, Ford, and others.
Sales volume increased, but margins were reduced.
Capital-intensive projects were undertaken at a time when evidence of unstable cash flow surfaced through irregularities in financial reporting and lender collateral reports.

How We Advised

Our experts were retained to perform a viability analysis, which uncovered errors on the company’s borrowing base certificate.

With their expanded role, they took over the CFO’s duties, cash management, financial reporting, and plant operations.
We terminated the SAP software program, corrected the borrowing base certificate, reissued corrected financial statements, eliminated unprofitable programs, and retained an investment banker to sell the company.
Major auto customers continued to source their business to other suppliers, and the non-auto business did not produce enough volume to cover overhead.
Our team was tasked with winding down the company, which it did in 2 months in a manner that allowed Johnson Rubber to complete all commitments with customer resourcing, vendor payments, and bank build of parts, and allowed employees to receive an extensive benefits package.
We ultimately reduced the impact of the winddown on stakeholders, vendors, and employees.

Key Contacts

Dan F. Dooley, CTP
Senior Managing Director
Strategic Advisory Practice
+1 603 660 8952
[email protected]

Mark J. Welch, CPA, CTP
Senior Managing Director
Strategic Advisory Practice
+1 412 498 8258
[email protected]

Related Practice Areas

> Out-of-Court Winddowns
We deliver strategic guidance through the winddown of business operations or underperforming assets, helping preserve value and reputation while avoiding the disruption, cost, and public scrutiny of formal bankruptcy. Our expert financial and operational advisors apply decades of experience providing exit solutions across a wide range of industries and complexities to deliver, and often execute, comprehensive solutions for distressed businesses.

> Business Plan Validation
We deliver integrated solutions for distressed and insolvent businesses that maximize recovery, mitigate risk, and restore enterprise value. Our experts are retained to help distressed organizations stabilize operations, protect stakeholder interests, and execute turnaround strategies. We take an operationally-focused approach that looks beyond the balance sheet to minimize further degradation and build a path to sustainable growth. Our team delivers hands-on guidance and independent analysis to lenders, creditors, legal counsel, executive teams, boards of directors, and investors.

> Office of the CFO & Corporate Finance Support
The financial function is a critical partner in value creation in most businesses. We provide unparalleled support to the Office of the CFO to shape organizational strategy and enhance long-term business value. As CFOs and finance leadership across sectors face increasing demands, understaffing, and unprecedented challenges, we deliver guidance regarding financial planning and operations improvement, risk mitigation, and strategic business intelligence.

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