A MAJOR supplier to Nissan and Jeep owner Stellantis has filed for bankruptcy with its boss lashing out on the final straw.
The shock action taken by the Japanese-based car parts manufacturer has prompted fears of a domino effect.
The car parts supplier is annoyed about the impact of Trump administration’s global tariff hikes[/caption]
Marelli Holdings Co. Ltd. yesterday announced that it has commenced voluntary chapter 11 cases[/caption]
Marelli Holdings Co. Ltd. yesterday announced that it had started voluntary chapter 11 cases in the United States Bankruptcy Court for the District of Delaware.
However, Marelli stressed that business will continue as usual.
It said in a statement that the global tech partner to the automotive industry planned to restructure its long-term debt obligations.
The filing for Chapter 11 bankruptcy protection followed months of uncertainty about its talks with creditors.
Marelli said it had secured a commitment of $1.1 billion in financing from its lenders.
The brand supplies car interior and lighting parts for Nissan and Stellantis – whose portfolio includes iconic brands such as Abarth, Chrysler, Citroën, Dodge, Jeep, Maserati, and Vauxhall.
Marelli owes its two customers a combined $767 million in unsecured debts, according to the company’s Chapter 11 bankruptcy petition.
The firm has blamed Donald Trump’s sweeping global tariffs as being the final straw.
It said in the filing that the global trade war had affected its liquidity position.
This was due to the supplier’s import and export-focused business and the tariff burdens imposed on the automotive industry, it added.
Trump, 78, kicked off his second term with a controversial global trade war with nearly every country by instituting a minimum 10 per tariff on their exports into the US.
In March, he signed a proclamation to impose a 25% tariff on imports of automobiles and certain vehicle parts.
David Slump, Marelli’s boss, criticized the hike – amid growing uncertainty about Trump’s tariff rollercoaster, which has unnerved business chiefs.
He said the firm had been “severely affected by tariffs due to its import/export-focused business and the imposition of tariffs specifically against automotive manufacturers and suppliers.”
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can’t repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open – even if it means selling off most of the company’s properties.
Chapter 7, on the other hand, sells all of a company’s assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with “parties of interest involving more than one country,” per the United States Courts.
BIG CASUALTY
The Wall Street Journal described the auto-parts bankruptcy as “the first big casualty” of the president’s tariff war.
It added that Marelli has been struggling with losses and a hefty debt load for years – ahead of Trump’s tariff changes.
But, Marelli’s court filing could signal the start of something ominous because the firm is regarded as a bellwether for the global auto industry, warned The Daily Mail.
UNDER PRESSURE
Automakers in the U.S. – including Nissan and Stellantis – are already facing pressure.
Car giant Stellantis last month announced a new CEO amid financial stress from increased tariffs and decreased sales.
Antonio Filosa, 51, will take on the role on June 23, the Associated Press said.
The U.S. Sun reported last October that Stellantis was cutting costs, and selling its 4,000-acre Arizona Proving Ground, 100 miles south of Las Vegas.
When the site is sold, Stellantis will instead use Toyota’s proving grounds in Arizona.
Stellantis, known for its European marques like Fiat, Alfa Romeo, and Opel, saw earnings and sales dip last year.
Meanwhile, Nissan‘s CEO has also announced sweeping changes to its production and workforce as the auto company struggles to bring in sales.
The car manufacturer estimated a roughly $5 billion loss.
JOBS SLASHED
Nissan will be slashing nearly 15% of its global workforce — about 20,000 employees — after a steep decline in vehicle sales, as reported by The Associated Press.
“We have a mountain to climb,” admitted Nissan’s Chief Executive Ivan Espinosa.
The U.S. Sun has contacted Marelli, Nissan and Stellantis for comment.
