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Automodular Posts 1Q Loss After GM Cancels Contracts

Wed, 05/05/2010 - 1:27pm
Manufacturing.net

TORONTO (CP) -- Car parts maker Automodular Corp. reported Wednesday a first-quarter loss of $200,000 net loss, improved from a year-earlier loss of $1 million loss but dragged down by the impact of General Motors cancelling its contracts with the supplier of auto parts and assembly line services.

Toronto-based Automodular said the quarter includes a $1.5-million pretax charge for severance costs and $3.3-million impairment charge related to the General Motors termination announced in April.

The loss amounted to one cent per share in the most recent period, versus a loss of four cents per share in the comparable period of 2009.

The cancelled contracts -- to supply parts and services for the assembly of the Camaro muscle car at GM\'s Oshawa, Ont. plant -- accounted for about 20 percent of Automodular\'s overall business but it continues to supply GM\'s plant in Lordstown, Ohio as well as Ford Canada\'s plant in Oakville, Ont.

The company had initially said 100 jobs would be lost due to the cancellation, but the Canadian Auto Workers union later said it had reached agreement with Inteva Products, the American firm that took over the supply deal with GM, to hire about 70 former Automodular employees.

Under an agreement involving their union and Inteva, some of the former Automodular employees will simply move to another factory in September, once Inteva sets up shop in Canada and takes on the contract.

Automodular has said it intends to sue GM Canada for $20 million for cancelling the agreement in the middle of the contract. GM Canada maintains the contract included a provision that Automodular needed to remain competitive and that GM had pressed it to lower costs.

Automodular\'s Oshawa operations will shut down on Sept. 21 and costs relating to the facility will be recorded in that period.

Excluding the impact of the GM cancellation, Automodular said its results were "significantly stronger than in 2009" with run rates "at higher than historical levels."

Sales in the quarter increased to $24.8 million from a year-earlier $13.2 million.

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