CityPress - - Business - MAX MATAVIRE busi­ness@city­

The pull­out of Gen­eral Mo­tors from South Africa has claimed its first ca­su­alty, with a sup­plier to the car maker be­ing placed into pro­vi­sional liq­ui­da­tion.

It is un­likely that the com­pany will re­cover from its dire fi­nan­cial po­si­tion, says Chris van Zyl of ac­count­ing firm Mazars, one of four pro­vi­sional liq­uida­tors to over­see Coega Au­tospray, a man­u­fac­turer of plas­tic trim com­po­nents for the au­to­mo­tive in­dus­try – mainly for Gen­eral Mo­tors SA (GMSA). It is sit­u­ated in Uiten­hage in the East­ern Cape.

Hav­ing met with Coega Au­tospray rep­re­sen­ta­tives this week, Van Zyl told City Press that its sup­ply was up at the end of Septem­ber, and there­after, the com­pany would prob­a­bly be closed and its as­sets auc­tioned off – un­less some­one came to the pro­vi­sional liq­uida­tors with an of­fer, which was “highly un­likely”.

Late last month, the Port El­iz­a­beth High Court granted an ap­pli­ca­tion, brought by trus­tees of the Vumela En­ter­prise De­vel­op­ment Fund Trust, for the com­pany to be placed into pro­vi­sional liq­ui­da­tion.

The trus­tees claimed that Coega Au­tospray owed Vumela more than R33 mil­lion in debts and in­ter­est.

Coega Au­tospray em­ploys 79 peo­ple and GMSA makes up 85% of the com­pany’s busi­ness. Vumela funds small and medium en­ter­prises which have growth po­ten­tial. It is backed by FirstRand.

Andrew Buchanan, Vumela’s head of post in­vest­ment man­age­ment, said: “Pro­vi­sional liq­ui­da­tion has been granted by the judge. This is not fi­nal. What hap­pens now is that a liq­uida­tor will be ap­pointed to go and as­cer­tain if the com­pany is a go­ing con­cern.

“The liq­uida­tor will also have dis­cus­sions with the cred­i­tors to find out their in­ten­tions – if the com­pany can still pay or not, or any other ar­range­ments that the cred­i­tors can come up with. The mat­ter will then be back in court on August 22 for the fi­nal or­der from the judge.”

In a court af­fi­davit, which City Press has a copy of, Buchanan said GMSA’s move to close shop in South Africa had af­fected Coega Au­tospray’s op­er­a­tions, so it would be un­able to pay back the loan.

Coega Au­tospray had not taken any ac­tive steps to cut its in­debt­ed­ness, he added.

The com­pany was in breach of both its bridge loan agree­ment and its con­vert­ible loan agree­ment ex­tended by Vumela, Buchanan said.

Ac­cord­ing to the liq­ui­da­tion af­fi­davit, “GMSA is the re­spon­dent’s main cus­tomer and pro­vides ap­prox­i­mately 85% of the re­spon­dent’s rev­enue. For the past num­ber of years, it has been plac­ing [a lower num­ber of or­ders] than the ini­tial tar­gets. This is one of the ma­jor rea­sons for the re­spon­dent’s cur­rent fi­nan­cial predica­ment.

“For the past 12 months, the re­spon­dent has tried, and failed, to ac­quire a new cus­tomer who can re­duce the one-cus­tomer de­pen­dency.

“The re­spon­dent is un­able to sur­vive on only the vol­umes it is likely to re­ceive from Isuzu as Isuzu only pro­duces ap­prox­i­mately 85 ve­hi­cles per month, as op­posed to the 100 ve­hi­cles that GMSA pro­duces every day.

“The cash flow which the re­spon­dent gen­er­ated from the or­ders it re­ceived from GMSA will re­duce sig­nif­i­cantly as it will no longer re­ceive such or­ders.”

It was also noted in the af­fi­davit that these fac­tors would have a neg­a­tive ef­fect on the cash flow po­si­tion of Coega Au­tospray as it was un­likely to be able to gen­er­ate the in­come that it had been gen­er­at­ing on his­tor­i­cal sup­port.

Ac­cord­ing to Buchanan, Coega Au­tospray’s li­a­bil­i­ties amounted to R57.5 mil­lion, which ex­ceed its to­tal as­sets – val­ued at al­most R46 mil­lion – by nearly R11.6 mil­lion. This meant that it was tech­ni­cally in­sol­vent.

Coega Au­tospray was un­able to pay its debts and Buchanan said it was “just and eq­ui­table” for the com­pany to be wound up.

When asked by City Press for com­ment, Coega Au­toSpray act­ing chief ex­ec­u­tive Mark Gil­bert de­clined, say­ing: “I want noth­ing to do with the press.”

The full im­pact of GMSA’s exit will be felt later this year and into 2018.

Mphumzi Maqungo, na­tional trea­surer of The Na­tional Union of Me­tal­work­ers of SA, said: “The ef­fects of GMSA’s exit are be­gin­ning to be felt as some com­po­nent sup­pli­ers face fi­nan­cial prob­lems and even liq­ui­da­tion.

“The full im­pact will be felt next year, when the cur­rent long-term con­tract agree­ments en­tered into be­tween the var­i­ous sup­pli­ers and GMSA start ex­pir­ing.

“We have three types of sup­pli­ers. First are those serv­ing var­i­ous car man­u­fac­tur­ers, not just GMSA. They won’t feel the ef­fects im­me­di­ately. Then we have deal­er­ships and work­shops.

“A num­ber of com­pa­nies have al­ready is­sued re­trench­ment no­tices. Once all the in­ter­nal pro­cesses are com­pleted, we will see and feel the im­pact on both the com­pa­nies and af­fected em­ploy­ees.”

In May, GMSA an­nounced that it would be pulling out of South Africa and stop op­er­a­tions by endDe­cem­ber as part of a global re­struc­tur­ing process.

GMSA spokesper­son Denise van Huyssteen said: “Con­sul­ta­tions with unions and em­ployee rep­re­sen­ta­tives, un­der the fa­cil­i­ta­tion of the Com­mis­sion for Con­cil­i­a­tion, Me­di­a­tion and Ar­bi­tra­tion, are in process. At the point of ini­ti­a­tion, it was es­ti­mated that 589 em­ploy­ees would po­ten­tially be im­pacted by the pro­posed re­struc­tur­ing.”

Do you think the dam­age caused by GMSA’s exit can be mit­i­gated?

SMS us on 35697 us­ing the key­word GMSA and tell us what you think. Please in­clude your name and province. SMSes cost R1.50

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