TOKYO -- Japan's Akebono Brake Industry will consider shutting as many as three plants in the U.S. and Europe as part of a plan to recover from soured North American operations.
The brake supplier, which owns 18 plants globally, will shrink capacity at a number of money-losing production sites in the two regions. Factory closures are also on the table. Staff at the affected plants will be cut or reassigned.
Akebono and its creditors will discuss the turnaround proposals during meetings scheduled for Monday and June 11.
The Japanese company controls a 20% share worldwide in automotive brake pads and names Toyota Motor, Nissan Motor and General Motors as key clients. Akebono staged an aggressive expansion in North America that backfired amid wildly inconsistent orders in the region. Facing crippling losses, the company filed to undergo an out-of-court rehabilitation process in late January.
To raise capital, Akebono gradually will sell most of its shares held in around 20 companies, including those issued by Isuzu Motors and other major automakers. Toyota, Akebono's top shareholder at 11.6%, will be exempt from the sell-off. The roughly 7 billion yen ($62.7 million) raised will secure cash flow through the end of June.
Akebono will raise an additional 20 billion yen to 30 billion yen from turnaround sponsors through preferred stock and other vehicles. At least four candidates, including investment companies at home and abroad, participated in the first-round bidding process at the end of March. U.S. buyout firm Bain Capital and two others apparently advanced to the next round, and the final choices will be made by the end of May.
The Toyota group will forgo providing capital backing, instead opting to support Akebono on the operational front, such as in procurement of brake components.
The supplier's capital adequacy ratio shrank to just 4.6% at the end of December. Akebono's interest-bearing debt has ballooned to 108.9 billion yen. The infusion of turnaround funds is expected to lift the capital ratio above 10%.
The North American operations sputtered largely due to transactions with GM. The American icon, which itself underwent a drastic restructuring following the global financial crisis in 2008, announced its latest reorganization last year. Orders from GM would seesaw between steep increases and decreases amid those shifts.
The ripple effect raised labor and transport costs at Akebono's U.S. factories. GM made no parts orders from the supplier for its latest vehicle models, dealing a near-fatal blow to Akebono's North American earnings. The Japanese company expects to turn in a consolidated net loss of 19.2 billion yen for the fiscal year ended Sunday.
Akebono seeks to survive as electric and self-driving vehicles transform the auto industry. The company, already known for its technical abilities, looks to restructure itself quickly into an organization that can readily invest in research and development.