Struggling contractors hope for sale of factory

March 9, 2009
Contractors struggling under the weight of an unfinished factory in Tipton are hoping for a quick sale to recover at least some of the $44 million they say they're owed by Getrag Transmission Manufacturing.

The unit of Germany-based Getrag Group filed for bankruptcy protection in Detroit in November after its partnership with Chrysler LLC collapsed. The joint venture around a new, fuel-efficient transmission was the sole reason for building the nearly 800,000-square-foot factory at the crossroads of U.S. 31 and State Road 28.

Work on the $530 million project came to a halt in October.

"The property is the only security we have," said Kirk Guy, chief financial officer of Industrial Power Systems in Maumee, Ohio. "We want to get as much out of that as possible."

Industrial Power Systems and many central Indiana construction firms worked under Walbridge Aldinger Co. in Detroit. As the lead contractor, Walbridge has a $44 million secured claim, which covers the smaller firms.

While elected officials pressure Chrysler to use its federal bailout money to rescue contractors and Tipton County taxpayers, contractors are putting their hope in the real estate.

The factory is 80-percent complete, and it has taxpayer-financed road and utility service.

"Realistically, I think eventually somebody's going to buy the building," said Jerry Albrecht, president of Moorehead Electric Co. in Marion, which claims it is owed $9.7 million. "It's beautiful."

An appraisal could be made public by the end of March. Getrag's bankruptcy attorney, Jeffrey Grasl at Foley & Lardner in Detroit, said he plans to file a plan for reorganization by the end of the month.

"We've been in discussion with Walbridge Aldinger about disposition of the property," Grasl said. "We're hoping a lot of these issues will be resolved this month."

The brand-new factory sitting empty at a major crossroads has attracted plenty of tire-kickers.

"We've even had inquiries for an Indian casino," Commissioner Jane Harper said. "It's been so broad as to be absurd."

But a few of the inquiries are serious. Tipton County recently hired an economic development director, Linda Williamson. She already has made contact with one company that wants to use half the building.

For tax purposes, Tipton County has assessed the factory and more than 140 acres at $100 million.

One industrial real estate broker, Tom Cooler at CB Richard Ellis in Indianapolis, said he'd be "shocked" if it fetched $100 million.

Cooler said the state-of-the-art manufacturing space could end up with a use as minimal as warehousing. Prices for warehouses range from $30 to $40 per square foot, he said. At that rate, the building could be worth less than $24 million.

Albrecht said he and others hope to stay afloat long enough to retrieve at least some proceeds. Banks don't want to back contractors on new projects as long as Getrag owes them large sums, he said.

"We're all hopeful this will be settled in the near future, so we can continue doing what we're supposed to be doing, which is adding to the economy in central Indiana," Albrecht said.

The Getrag-Chrysler deal held great promise for the region. About 1,400 people, many of them Chrysler employees in Kokomo, were supposed to start work in the factory this year. The state of Indiana spent $3.2 million improving roads. Tipton County issued $14.1 million in bonds to increase water and wastewater capacity, as well as covering land costs.

Chrysler sued Getrag in October, alleging the transmission-maker failed to arrange adequate financing for the project. Getrag has filed a $688 million counterclaim, asserting Chrysler didn't have the money to hold up its end of the deal.

Meanwhile, Indiana Commerce Secretary Mitch Roob and the Tipton County Commission have been sending demanding letters to Chrysler.

If Chrysler would send some of its federal bailout money to Tipton County, Roob wrote, the state would consider forgoing a claim for the cost of road work.

Chrysler's response, so far, has been to direct the officials to Getrag and the bankruptcy proceedings in Detroit.

"We're exploring our litigation options, but we're hoping Chrysler will honor its obligations," said Rick Hall, a Barnes & Thornburg partner who represents Tipton County.

Hall said Tipton County never would have issued bonds if Chrysler had kept officials abreast of the project's progress, as required under a May 2007 agreement.

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