Another victim of staffing shortages, inflation and supply chain disruptions has filed for voluntary Chapter 11 bankruptcy protection.
Romeo-based Cammand Machining LLC filed a petition for bankruptcy Tuesday in the U.S. Bankruptcy Court of the Eastern District of Michigan in Detroit.
The machine shop, which services the mold-and-die industry for automotive and aerospace customers, indicated in the filing that it was never able to recover from the COVID-19 pandemic. After two forbearance agreements with its lender, it chose to declare bankruptcy.
The company has between $1 million and $10 million in liabilities and less than $50,000 in assets, according to the filing.
"The global COVID-19 pandemic has had a long-lasting impact on the debtor's operations," according to a motion filed by Scott Kwiatkowski, an attorney representing Cammand. "… Due to the inability to run a second shift and the increased expenses associated with the global supply chain issues, operational costs have increased and the debtor was faced with an imminent closure of the company."
Kwiatkowski, an associate at Southfield-based Goldstein Bershad and Fried PC, did not respond to a request for comment Thursday. Crain's also left a message with the company.
The bankruptcy this week is the latest sign that the financial troubles of some small manufacturers and suppliers may be coming to a head. Bingham Farms-based Gissing North America LLC filed for Chapter 11 last week citing many of the same factors as Cammand, including inflation and labor scarcity.
"The landscape has changed over the past nine months — raw material pricing has gone through the roof, labor is still terrible, inflation, gas prices, all of those factors are now really hitting all at once," said Dennis Loughlin, partner at Warner Norcross + Judd LLP, who is not involved in the Cammand case. "If it's bad for the tier ones and tier twos, it's even worse for the tier threes and tier fours."
Cammand, founded in 2002, operates in a 14,000-square-foot shop with CNC, gun drilling, and surfacing and design equipment.
At its pre-pandemic peak, Cammand had 18 employees running two shifts daily during the week with limited weekend hours, the filing said. It has since lost two-thirds of its staff.
"Prior to the global pandemic 20 percent of the debtor's orders for jobs were from Canada and since the global pandemic began the debtor has lost the majority of Canadian jobs thereby causing a reduction in income," the filing said.
The company owes about $1.5 million to Huntington National Bank, with which it worked out two prior forbearance agreements. It also owes the U.S. Small Business Administration nearly $120,000 for unforgiven Paycheck Protection Program loans.
Its other big creditors are Birmingham-based Mac R LLC, which claims $132,210, and Sterling Heights-based Merrifield Machinery Solutions, which claims $14,500.
Cammand estimated it would need to spend about $252,780 to continue business for the next three months, which it said would be in the best interest of its creditors. The court approved a motion Tuesday to allow the company to use the cash collateral.
The company filed for Subchapter V of Chapter 11 protection, which is a new bankruptcy option that became effective in 2020 and is designed for smaller businesses. It is significantly less costly and time-consuming than traditional Chapter 11, Loughlin said, which is why he expects it to be utilized more frequently in the near future.
"For the tier one and tier two suppliers, over the past six to 12 months, we have been engaged in a lot of requests for pricing relief from the tier higher or the OEMs with varying degrees of success," he said. "It's a long process that can be very frustrating, but I believe it's only worse if you are further down in the tier system."
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