Honsel AG - The Return of the Locust

Business is booming at the Meschede-based automotive supplier Honsel AG.  Honsel develops and manufactures aluminium and magnesium products using casting, extruding and rolling processes for engine, transmission, suspension and car body of passenger cars and commercial vehicles. According to its Web site the company has a global workforce of 3,800 and annual sales of 540 million euros (760 million dollars). Yet this week Honsel filed for insolvency in the nearby town of Arnsberg.  How could it be that campany operating all out with five shifts just to keep up with orders would become bankrupt.  It turns out that Hormel had the misfortune to be acquired by a "Locust" (Heuschrecke) - also known as a Hedge Fund - in this case the US group Ripplewood Holdings.

The Sueddeutsche Zeitung reports on the sorry situation: Heuschrecke zerlegt Automobilzulieferer ("Locust Dismantle Automotive Supplier"):

Auch in Zeiten des Aufschwungs produziert die Wirtschaft Verlierer. In diesem Fall hat es den Automobilzulieferer Honsel erwischt, der nun Insolvenz anmelden musste. Und das, obwohl das Unternehmen Tag und Nacht arbeitet, um alle Aufträge abzuarbeiten. Dennoch blieb dem zuständigen Amtsgericht in Arnsberg nichts anderes übrig, als den Konkurs zu bestätigen. Nach Lage der Dinge geht die Pleite erneut auf das Konto einer Heuschrecke.

(Even in the midst of a recovery there are economic losers.  In this case it caught up with the automotive supplier Honsel, which had to file for bankrupcty protection.  This, even though the firm has been working day and night fulfilling orders.  Still, the court in Arnsburg had no choice but to declare the company insolvent. It appears that we have a another case where a locust is responsible for a business failure.)

Ripplewood followed the typical American PE business model of taking a healthy, cash-generating business, loading it with unsustainable levels of debt, and paying themselves lavish dividends and "management fees":

Der IG-Metall-Bevollmächtigte Wolfgang Werth aus Arnsberg zeigte sich von der Insolvenz wenig überrascht. "Der Haupteigner hat die Belegschaft immer im Regen stehen gelassen und kein wirtschaftliches Konzept gehabt, sondern immer nur auf das Geld von Kunden und Beschäftigten geschielt", sagte er. Die Geschäfte bei Honsel laufen nach Auskunft von Werth gut. Es werde im Fünf-Schicht-Betrieb gearbeitet. "Die Insolvenz bietet die Chance, Heuschrecken und Finanzinvestoren loszuwerden und wieder einen strategischen Investor zu finden."

(Wolfgang Werth, representing the IG-Metall union, was not at all surprised by the insolvency. "The principla owner left the workers standing out in the rain and never developed a clear economic strategy, but rather always had his eyes on the cash of the customers and the workforce," he said.  But Werth says the business is going well, operating 5 shifts. "The bankruptcy gives us the opportunity of getting rid of the locust and financial investors and find instead a strategic investor.")

Comments

[George]

First of all: it's Meschede, not Eschede--totally different cities. As for Honsel itself, they got on the slippery road downwards already in 1999 when the up-to-then family-owned company went to the stock market to acquire fresh capital. Quickly the Carlyle Group (yes, the one with the close ties to the Bush family) bought Honsel completely. They invested little, but merely "optimised" the workflow by reducing the workforce here in Meschede and outsorcing various processes and know-how to new subsidiary branches all over the world. It was just a matter of time, then they sold the whole company to Ripplewood. They did what they always do, with the now known result.

[David]

George- thanks for the correction and the additional information. I should have guessed that Carlyle was somehow involved in the background.