Detroit Stews As Venture Creditors Boil
,
Ford Motor
and
DaimlerChrysler
have been getting nervous watching the carnage at Fraser, Mich., auto parts supplier
Venture Holdings
.
Last week, Venture, together with its unsecured creditors, sued its owner,
Larry J.
Winget
Larry J. Winget
, to recover $315 million he allegedly siphoned from the parts supplier. Unsecured creditors like
E.I. du Pont de Nemours
, a subsidiary of
American International Group
and bond funds run by
Merrill Lynch
and
Eaton Vance
are trying to get back some of the $500 million or so Venture has owed them since it filed for court bankruptcy protection last year.
The Big Three automakers have heavily relied on Venture for plastic parts such as dashboards and bumpers. General Motors
, for example, gets $240 million worth of plastic parts annually from Venture. Sources familiar with the situation say the automakers are nervous that a sudden Venture collapse could endanger supply lines that use Venture parts. Venture has agreements with automakers that do not allow them to move Venture work to replacement supply shops until the end of April.
The Venture blowup has been going on for over a year and seems to be reaching a critical point. Winget co-founded the company 30 years ago, became its sole owner and built Venture into an outfit with $1.9 billion in annual sales. He financed the company's growth with $852 million in debt, which he partly used to buy a German parts shop called Peguform in 1999.
The problem, as Forbes reported a year ago, was that Winget also owned affiliated companies that were held separately from Venture (see "
Auto-Da-Fe
"). These separate companies received tens of millions of dollars from Venture. The transactions between Venture and Winget's separate affiliates were largely disclosed, but with so much money going out the door, Venture eventually had trouble paying its bills. Directors at Venture's German unit put it in receivership in 2002, and Venture wound up in bankruptcy court last year. Winget resigned as chief executive, and five independent directors were appointed.
At the time of the bankruptcy filing, it looked as if Winget, 63, would get out of the mess by folding the outside affiliates into Venture and paying off the banks with about $450 million in cash and securities. He also planned on giving up 49% of the company and some other securities to bondholders. But the reorganization deal got squashed, and Winget--who still owns the company--and creditors remain in negotiations.
The 91-page lawsuit, filed in a Detroit bankruptcy court by Venture and unsecured creditors, calls the transactions made between Venture and the separate affiliates "a concerted scheme by Winget" that was "fraudulent." The suit says Venture funded a sports car maker owned 75% by Winget and a golf course he owned with $38 million. Venture also paid a 3% sales commission amounting to $52 million over six years to a marketing entity owned by Winget.
"Venture's relationships with Mr. Winget's related companies have been in place for many years. Virtually all of them were fully disclosed, with financial information, to Venture's creditors before those creditors extended credit," said Winget's lawyer, Ralph McKee, who was reading from a statement. "The suit is part of the strategy of Venture's bondholders to make personal attacks on Mr. Winget and his family in order to extract value which would otherwise be unavailable."
While the situation at Venture deteriorates, the Big Three automakers might decide it's safer to get plastic parts elsewhere in the future. But for now they have their current production schedules to worry about. That leaves Winget and Venture's creditors little time to cut a deal.
Auto-Da-Fe
04.14.03
Larry Winget got rich off auto parts, but enraged German automakers and U.S. creditors.