By MEGHAN DURBAK, Kokomo Tribune staff writer
TIPTON - The second largest private employer in Tipton has filed for bankruptcy.
Steel Parts Corp. filed Chapter 11 bankruptcy Friday, meaning the company can still reorganize.
In this case, the corporation needs to be sold in order to keep its doors open, according to Scott Sigler, vice president of United Steel Workers Local 3875.
Sigler said the steel auto parts factory currently employs roughly 237 people, with the majority being Tipton County residents.
"We're all kind of numb," Sigler said. "You just got to hope and pray for the best."
While employees were shocked by the announcement, Sigler said they weren't surprised.
"This company always let us sit in on month end reviews. We knew for awhile we were going back instead of forward," Sigler said.
He attributes the company's down turn to the instability at the company's primary consumer, Ford Motor Co.
The union treasurer, Phil Parton, added that much of the problem stems from Ford's periodic closure of plants.
"The closed plants, it hurts us because you don't ship that week," Parton said.
So far, there's a lot of uncertainty mingled with hope.
Under the Chapter 11 bankruptcy agreement made by company owners Jim Ashton and Dick Fagan, the company must be sold, Sigler said.
He said the company has made arrangements with a potential buyer: Cleveland, Ohio-based Resilience Capital Partners.
"It's not an unusual way to go about a sale," said Bill Keir, executive director of Tipton County Economic Development Corp.
Keir explained there is a preference to buy a company under bankruptcy, because the buyer won't have the burden of certain taxes and loans until Steel Parts can come out of bankruptcy.
While the owners already worked out a deal with Resilience Capital Partners, Sigler said bankruptcy law says the company must be put on auction for 30 to 45 days.
The fate of the company now rests in the hands of a bankruptcy judge, with a hearing scheduled for 4 p.m. today at the U.S. Bankruptcy Court for the Eastern District of Michigan Southern Division.
Sigler said it could take until mid-October before anything is finalized.
Sigler said Ashton and Fagan have always worked to keep the factory in Tipton and to maintain benefits for all retirees and active employees. Sigler prefers Resilience Capital Partners because he believes it will work for the same goal.
It's a goal not shared by all potential buyers, Sigler said.
"Some have just wanted to buy us out for our assets," Sigler said, adding some were wanting to slash benefits to retirees and current employees.
The worst case scenario is the business will close, he said.
Just as bad, he said, would be for the company to sold to someone who doesn't care about the employees.
Sigler and Parton said they feel helpless in the situation.
"You're in limbo, it's out of your hands," Parton said of the pending auction.
It's not just the employees who will suffer if Steel Parts goes out of business or relocates.
"This will hurt the county quite a bit," County Auditor Suzanne Alexander said. It would hurt the city of Tipton even more, she added.
Steel Parts is the county's third-highest taxed entity, Alexander explained.
Annually, the company pays more than $370,000 in taxes, she said.
On the receiving end of those taxes is the city with 47 percent, Tipton Community Schools with 40 percent, and the county with 11 percent. Other government entities pick up the rest.
Not to mention there could be lost income tax revenue as the bankruptcy threatens lost jobs and layoffs.
Without the tax revenue, Alexander said, "[The county] won't be able to operate like we were anticipating."
That means there would have to be additional cuts from the budget, she said.
Alexander still has reason to hope.
Union workers like Parton are optimistic from what they've been told. Parton said he has reason to believe there is a good chance Resilience Capital Partners will buy Steel Parts.
For now, the tone is fairly positive.
"We're being told it's business as usual," Sigler said.