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May 9, 2008 |
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BLUE WATER: Incentive Payments to Critical Employees Challenged Blue Water Automotive Systems, Inc. and its affiliated debtors will appear before the United States Bankruptcy Court Eastern District of Michigan on May 12, 2008, to address concerns raised by various parties regarding their request to make incentive payments totaling US$497,812 to a limited number of critical, non-insider employees. The Debtors and the objecting parties agreed to the hearing schedule, pursuant to a Court-approved stipulation. As reported by the Troubled Company Reporter on April 21, 2008, the Debtors proposed that the payments be treated as administrative expenses of the Debtors' estates. Nicole Y. Lamb-Hale, Esq.,at Foley & Lardner LLP, in Detroit, Michigan, said that while certain of the Employees have titles suggesting they are insiders, like vice president, they are not covered by Sections 101(31) and 503(c). She said the Critical Employees are mid-level employees who are critical to the day-to-day operations of the Debtors. The Debtors argued that the Incentive Payments are necessary to appropriately compensate the Critical Employees, given the enormous additional burdens placed on them by these bankruptcy proceedings, and to ensure that the Employees remain motivated to perform the important tasks necessary to maintain the value of the Debtors' businesses. The Debtors said if they are unable to make the Incentive Payments, there will be more departures of employees that will be harmful to the enterprise value of the Debtors' businesses. A schedule of the Critical Employees and their incentive payments is available for free at: http://bankrupt.com/misc/Bluewater_list_of_employees.pdf The Official Committee of Unsecured Creditors objects to the Debtors' proposed incentive payments to critical employees to the extent that granting of the Motion is construed to create any administrative expense claims or obligations of the Debtors' estates in the event their Chapter 11 cases are converted to cases under Chapter 7 of the Bankruptcy Code. Furthermore, the Committee is against the payment of incentives until all currently existing administrative expenses have been paid. The Committee believes that it is unlawful and unfair to current holders of administrative expense claims, including Section 503(b)(9) claimants, for the Debtors to create new obligations in favor of its employees and then prefer to those new obligations over pre-existing administrative expenses which the U.S. Congress has granted priority. The Committee wants the Debtors' request denied. On behalf of the International Brotherhood of Teamsters Local Union No. 339, representing 450 people at the Debtors' Port Huron and Haas Drive Plants, Ronald Hreha, president of Local Union No. 339, relates that the collective bargaining agreements between the Debtors and the Union provide that the Debtors will negotiate a bonus plan for 2008 to replace the 2007 Bonus Plan, and yet, as of April 21, 2008, the Debtors did not negotiate with the Teamsters despite repeated requests. Though the Debtors claim that "the incentive payments are essential to reward the [Critical] Employees for all their efforts throughout these bankruptcy cases, to maintain the morale of the Debtors' management and employees," the Union contends that incentive payments to select employees is counterproductive as it will decrease morale for hourly employees who are trying to negotiate a minimal plan, therefore discriminating against the majority of employees. "We are strongly discouraged by the morale crushing actions of Sam Serra and Amy Harding both of which are proposed to receive Incentive Bonuses. These individuals terminated as Steward from each plant for protected concerted actions. The two Stewards merely posted information regarding the Debtors' motion for Incentive Bonuses which is public knowledge," the Union tells Judge McIvor. The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, and the United Steel, Paper, Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, also questioned the proposed payments. The unions, however, withdrew their objections. UAW and USW did not state the cause of their action. About Blue Water Automotive Blue Water Automotive Systems, Inc. designs and manufactures engineered thermoplastic components and assemblies for the automotive industry. The company's product categories include airflow management, full interior trim/sub-systems, functional plastic components, and value-added assemblies. They are supported by full-service design, program management, manufacturing and tooling capabilities. With more than 1,400 employees, Blue Water operates eight manufacturing and product development facilities and has annual revenues of approximately US$200 million. The company's headquarters and technology center is located in Marysville, Mich. The company has operations in Mexico. In 2005, KPS Special Situations Fund II, L.P., and KPS Special Situations Fund II(A), L.P., acquired Blue Water Automotive through a stock purchase transaction. In 2006, the company acquired the automotive assets and operations of Injectronics, Inc., a manufacturer of thermoplastic injection molded components and assemblies. KPS then set about reorganizing the company. The company implemented a program to improve operating performance and address its liquidity issues. During 2007, the company replaced senior management, closed two facilities, and reduced overhead spending by one third. Blue Water Automotive and four affiliates filed for chapter 11 bankruptcy protection Feb. 12, 2008, before the United States Bankruptcy Court Eastern District of Michigan (Detroit) (Case No. 08-43196). Judy O'Neill, Esq., and Frank DiCastri, Esq., at Foley & Lardner, LLP, serves as the Debtors' bankruptcy counsel. Administar Services Group LLC acts as the Debtors' claims, noticing, and balloting agent. Blue Water's bankruptcy petition lists assets and liabilities each in the range of US$100 million to US$500 million. The hearing on the Debtors' disclosure statement and plan is set for Aug. 5, 2008. (Blue Water Automotive Bankruptcy News, Issue No. 13, Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) |
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