American LaFrance Files for Chapter 11 Bankruptcy Protection

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Researched by Industrial Info Resources (Sugar Land, Texas)--Barely three months after moving into a brand new $63 million, 440,000-square-foot assembly plant and headquarters in Summerville, South Carolina, American LaFrance LLC (Summerville, South Carolina) filed for Chapter 11 bankruptcy protection on Monday, January 28, 2008. American LaFrance, which has 1,000 employees in six states, will close a 73,500-square-foot manufacturing plant in Sanford, Florida, and consolidate its aerial refurbishment operation from Lebanon, Pennsylvania, to its main aerial production plant in Ephrata, Pennsylvania.

The company opened the South Carolina plant in October 2007, coinciding with American LaFrance's 175th anniversary. Coincidentally, the company's CEO resigned the day before the grand opening. In December, about 100 of about 500 employees at the plant were placed on a temporary furlough, which was supposed to last through January 14, 2008. The date was then extended until mid-March because of the lack of capital for parts in order to resume full production. The company plans to restart manufacturing on March 10, 2008. Other factors that were said to have hindered performance by the company are “operational difficulties encountered upon the separation of American LaFrance's business from the business of its former parent, Freightliner LLC. To address these operational problems and to fund general operating expenses, American LaFrance has incurred approximately $150 million in secured debt since the business was purchased from Freightliner LLC.” Freightliner owned the company from 1995 until the end of 2005.

When American LaFrance was purchased from Freightliner LLC (Portland, Oregon) by private equity firm Patriarch Partners (New York, New York), the company was experiencing several changes. It was changing ownership and sharing a plant with Daimler Chrysler, Freightliner's parent company at the time. American LaFrance was planning, building and moving to the new South Carolina plant in a short timeframe in order to move out of Daimler's Ladson, South Carolina, plant. In addition, federal regulations requiring vehicles to meet lower emissions standards had been introduced, resulting in vehicle design and engineering changes. All of this was taking place while the company was trying to trying to continue day-to-day operations and fulfill backlogged orders.

In the midst of all of the changes, it seems that inventory had not been accurately tallied. There were major compatibility and technical issues with the new Enterprise Resource Planning (ERP) system, as well as declining sales and mounting debt. The ERP system was to replace accounting, inventory, payroll and manufacturing process services previously performed by Freightliner's system. Freightliner had agreed to provide these services through June 2007 when American LaFrance was expected to be a self supporting entity. American LaFrance had selected a contractor to develop a new system, which it claims had many glitches that hindered daily inventory tracking and manufacturing operations in addition to lost financial information. Employees were unable to locate necessary parts because of the mismanaged inventory. The move to the new plant brought about its own set of logistical challenges and slowed the pace of production. The company had a limited ability to deliver products to customers, resulting in limited funds coming in.

Currently the company owes more than $100 million to more than 1,000 creditors. In 2007, American LaFrance lost $56 million on sales of $195 million. In 2006, the company lost $48 million on sales of $233 million. The company is planning to continue to honor existing orders and warranties and hopes to emerge from bankruptcy within 90 days.

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