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Exide Technologies files for Chapter 11 bankruptcy

Wed, 06/12/2013 - 18:36 -- Editor

Exide Technologies has filed for Chapter 11 bankruptcy following a slump in share prices over recent months. This is the second time in a decade the company has filed for bankruptcy having sought Chapter 11 protection in 2004 also.

The company cites rising production costs, intense competition and the economic downturn in Europe as the precursors to this situation.

The company has opted for bankruptcy to restructure its finances and operations. In a statement the company said: "In recent years, competition in the battery industry has intensified, especially in the auto parts, retail and mass merchandise channels where large customers are able to use their buying power to negotiate lower prices and longer payment terms, or move business elsewhere if their demands are not met."

Exide lost out to rival Johnson Controls for a deal to supply automotive batteries to Wal-Mart Stores in 2010. Wal-Mart had previously been one of Exide’s largest customers and the loss of its custom resulted in a reduction of around US$160 million in annual income.

Exide has debts totaling US$1.13 billion and assets of US$1.88 billion. The court documents state the filing is to cut this debt and implement a plan to regain competitiveness in the market.

In 1995 Exide’s shares peaked at US$57.50, but this year have had a 52-week low of US$0.13 and a current NASDAQ value of US$0.23 (at 18.06.2013).

In a statement, James Bolch, President and Chief Executive Officer of Exide said the company plans to restructure and make operational changes to aide moving the company forward. He said: “We intend to become even more aggressive in reducing costs, taking actions with respect to underperforming business segments and to focus on the most attractive areas for future growth.”

Exide has secured US$500 million debtor in possession financing to carry out this restructuring and fund daily operating costs.

This filing is for the US parent company only and does not affect Exide’s international operations. The company plans to continue to operate globally without interruption during the process.

This is not the first time the company has sought bankruptcy protection. In April 2002 the company made a chapter 11 filing following falling share prices, debts of over US$1 billion, decline in the auto-making industry and a large court fine for selling used batteries as new.

The company blamed its problems on ‘legacy issues’ relating to bad previous management but with a new management team the company recovered from this murky past. In April 2004, a judge approved the company's plan to eliminate $1.3 billion in debt and exit bankruptcy protection by the end of the month.