Supplier Lear Preparing To File Bankruptcy, Report Says

Supplier Lear Preparing To File Bankruptcy, Report Says

DETROIT - One of the world's largest auto-parts suppliers, Lear Corp., is preparing to file for Chapter 11  bankruptcy as soon as next week, sources have told the Wall Street Journal.

Industry experts have predicted that as automakers bring assembly plants back onstream after summer shutdowns and inventory-adjustment shutdowns, cash-strapped suppliers will not be able to come back onstream.

After being spurned by the federal government after their requests for financial help, suppliers may have to file for bankruptcy or go out of business altogether as many already have. Experts fear there could be a domino effect, shutting down production of other suppliers and automakers across the nation.

The Detroit-based Lear, the world's second-largest supplier of seats and seat components, has been on the bankruptcy watch list, since drawing down a credit line early this year, reporting a quarterly loss of $265 million and missing a $38-million interest payment June 1 on senior notes. The company is in a 30-day grace period that expires Tuesday, the Journal said.

Lear, which supplies most automakers and is a large supplier to bankrupt General Motors, has been trying to negotiate an out-of-court deal with lenders, but company lawyers are "prepared" to put the company into bankruptcy, a source told the Journal.

Lear, which has been around in some form for 90 years and had $14 billion in revenues last year, recently has talked with banks for debtor-in-possession financing during a court-supervised restructuring. J.P. Morgan Chase & Co. and Citigroup Inc. will provide the bulk of the loan, the Journal reports.

Lear would become the eighth major supplier to file for Chapter 11 since 2005, the Journal said.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.