B e a t e n - d ow n Anderson finally has some good auto-related news: Remy International Inc., headquartered in the industrial city of 60,000, is poised to survive- perhaps even thrive-thanks to a bankruptcy reorganization plan that halves its debt, along with other moves that make it more competitive.
"Frankly, I think this is a great piece of information for Anderson," Anderson Mayor Kevin Smith said of the company's trip through bankruptcy court, which is expected to conclude late this year. "It helps stabilize their business roots in the city."
Forgive Smith for his giddy tone. There hasn't been a lot to cheer about of late, at least related to the auto industry. It was only months ago that Pendletonbased Guide Corp. ceased operations, closing its 1,200-worker Anderson taillight plant in the process.
Body blows like that one are nothing new for Anderson, which in recent decades has paid a stiff price for hitching its fortunes to once-mighty General Motors Corp. In the last 20 years, as thousands of auto jobs disappeared, the city's population has fallen more than 15 percent.
So the survival of a headquarters company with $1.2 billion in annual revenue and more than 7,500 employees in the United States and foreign countries is worth celebrating. Remy, which makes alternators, starters and other electrical parts, employs about 400 at its Anderson headquarters-well-paying jobs in an area that badly needs them. Anderson is the county seat for Madison County, where per-capita income is just $32,300, 12 percent below the state average.
Remy, like Guide, is a GM spinoff, that for years was among Anderson's preferred blue-collar employers. But the company hasn't had a local manufacturing presence since 2004, when it closed its Anderson factory, idling 400 workers.
Now, it's time for a fresh start. CEO John Weber has been trying laboriously to restructure the company since April, when it missed a $7 million bond payment. It filed a "prepackaged" Chapter 11 bankruptcy on Oct. 8, after lining up overwhelming support for its reorganization plan. The company hopes to complete the bankruptcy within 60 days.
That's not to say the company's odyssey has a touchy-feely ending. Under the reorganization, some creditors are swapping debt for stock in the company. The big losers are existing shareholders, whose stock will be canceled, leaving them with nothing. The majority shareholder is New York-based Citicorp Venture Capital Ltd., which took Remy private in 2001. Another loser is Warren Buffett's Berkshire Hathaway, which owns 20 percent.
There's reason for optimism in the Remy camp, and not just because the lighter debt load will make the company more nimble.
According to a Remy filing with the Securities and Exchange Commission, the company's electrical devices-sold under such brand names as Delco Remy and World Wide Automotive-have the No. 1 market share in North America in at least six market segments.
The company says it ran aground because some of the products it sold to GM were priced too low at a time raw material costs were rising. Also pinching finances was an aggressive growth strategy that included more than $300 million in acquisitions from 2000 to 2005, a buying spree that ballooned debt to $700 million.
Remy over the summer reached a new supply agreement with GM that included better pricing. The company also identified 1,600 opportunities to cut costs by renegotiating contracts, and opened talks to do so. That project now is nearly complete.
"As a critical part of the restructuring, Remy successfully renegotiated certain material commercial agreements to improve margins," said a report by Nancy Messer, a credit analyst with New Yorkbased Standard & Poor's Ratings.
Anderson isn't waiting around for the halcyon days of the U.S. auto industry to return. Instead, economic-development officials are focusing on initiatives like the Flagship Enterprise Center, a certified technology park that aims to foster innovation by tapping the expertise of engineers, former plant managers and other auto-industry veterans who still live in the area.
The city recently has landed some economic-development plums that will help diversify its economy. In 2005, Dallasbased Affiliated Computer Services Inc. agreed to open a call center that will employ 500. Last year, Swiss food giant NestlÃ© agreed to build a 350-worker advanced manufacturing plant that will produce Nesquik and Coffee-Mate.
Still, Anderson isn't about to turn its back on an industry that once employed tens of thousands of local residents. Nor should it. After undergoing years of wrenching change, the U.S. auto industry appears poised for a resurgence. It's only fitting that a car town like Anderson stands to benefit.