It’s been obvious for a long time that it wasn’t a match made in car-part heaven.
So last week, after two years of problems, Motorcar Parts of America in Torrance announced it had broken off its subsidiary Fenco, which filed for Chapter 7 bankruptcy liquidation the next day.
The news was cause for renewed confidence in Motorcar Parts; it was one of the biggest gainers on the LABJ Stock Index, rising 21 percent to $7.40. (See page 38.)
Fenco was the brand name for Fenwick Automotive Products Ltd., a Toronto company that also had a division in Torrance. At least three Fenwick manufacturing and distribution facilities in Pennsylvania closed before the bankruptcy filing, with about 200 layoffs, local media reported.
Motorcar Parts announced that Fenco was separated and managed by a restructuring officer and its own board. George Miller of Miller Coffey Tate LLP in Philadelphia will be the trustee during the bankruptcy process.
“While Fenco had made progress in its transition plans for the undercar segment since the acquisition, the cost savings and operational efficiencies were not sufficient for Motorcar Parts to continue its involvement with Fenco under the current financial structure,” Selwyn Joffe, chief executive of Motorcar Parts, said in a statement last week announcing the separation of the companies.
Motorcar Parts exhausted multiple options before walking away from Fenco. The company tried to keep Fenco afloat for two years by trying to raise additional money and streamlining Fenco’s operations.
Joffe declined to comment through Motorcar Parts spokesman Gary Meier, who said the company would offer specifics when it releases its earnings soon.
A sale was not viable because of Fenco’s debt, one analyst said.
“Fenco is insolvent,” said B. Riley and Co LLC analyst Jimmy Baker in Chicago who covers Motorcar Parts. “There’s nothing to sell. Debt holders have claims in every piece of the business and then some.”
Motorcar Parts, which started in 1968, primarily manufactures and remanufactures under-the-hood parts for cars such as alternators and starters, selling the parts to retailers, repair shops and wholesalers.
The manufacturer bought Fenco, which makes and sells under-the-car parts such as brake calipers and clutches, in a stock deal worth more than $5 million in 2011.
When the purchase was announced, investors saw it as a major coup that would allow Motorcar Parts to broaden its product offerings.
At the time, Fenco was a struggling company that Motorcar Parts hoped to turn around. It was a good time for the car-parts industry: The recession was forcing people to keep their vehicles longer than they had in the past, so car owners and their mechanics were more likely to buy aftermarket parts.
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