Quote, originally posted by Detroit News »
Washington — The Pension Benefit Guaranty Corporation said Tuesday it will assume responsibility for a bankrupt Michigan auto supplier’s underfunded pension plan.
The government’s pension insurer will take over Portage-based Contech US LLC’s pension plan covering 532 workers and retirees effective immediately, the agency said in a statement.
According to PBGC estimates, the Contech US LLC Pension Plan is 38 percent funded, with assets of $8.4 million to cover benefit liabilities of $22 million. The agency expects to cover $12 million of the $13.6 million shortfall.
Contech LLC sought bankruptcy protection in January in Detroit after it had been acquired in 2007 by investment firm Marathon Asset Management LLC. It has nine U.S. plants, with its Walled Lake plant responsible for much of its revenue.
“This action is an integral part of our ongoing efforts to restructure Contech and meet the challenges of the automotive industry going forward. We continue to work closely with our lenders and customers to reach a consensus on the remaining changes that are necessary,” said Morris Rowlett, chairman & CEO of Contech in a statement in January when the company sought bankruptcy protection.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ends Tuesday.
Retirees and beneficiaries will continue to receive monthly benefit checks without interruption, and future participants will receive their pensions when they are eligible to retire, the PBGC said.
Within the next several weeks, the PBGC will send notification letters to all participants in the Contech plan detailing the change.
Privately held Contech was founded in 1950 and builds light metal die casting and machining for automobile and parts manufacturers.
The company was sold from former owner SPX Corp. to Marathon Asset Management, a private equity firm, in 2007. Contech’s U.K. subsidiary based in Wales is not in bankruptcy.
Contech has six casting facilities in Michigan, Indiana and Tennessee, and had sales of $312 million in 2007, but saw sales fall to $223 million in 2008 as auto sales plummeted.
Marathon has sought to use Section 363 of the bankruptcy code to sell nearly all of Contech’s casting assets to Revstone Industries LLC.
Revstone would pay $14 million and assume certain liabilities from its casting facilities under the proposed sale.
Last week, several major customers of Contech filed an objection to the sale.
Ford Motor Co., Automotive Components Holdings LLC, BMW AG and Delphi filed a joint objection to the sale. Ford and Delphi both have said they won’t accept Revstone as a replacement supplier.