Bellwright's ills reveal small-business perils

The survival of a longtime Summerville manufacturer whipsawed by the loss of several big contracts and plummeting revenue now hinges on a quick sale of the business.

Financially ailing Bellwright Industries Inc. , which sought bankruptcy protection in March, hopes it can nail down a deal with Mid-State Machine Co. of North Carolina as early as this week.

"We're attempting to move the case along very, very quickly," Bellwright attorney Ivan Nossokoff said last week.

Bellwright workers use automated equipment to hone raw steel into highly precise machined parts. Its client list over the years has included suppliers of axles, differentials and other components to the likes of General Motors Corp. and other big vehicle makers.

Bellwright was a pioneer of sorts, setting up shop in Summerville back in 1977 to capitalize on the then-nascent southern migration of the auto industry. It hit its share of financial potholes, but the company managed to scrape by. In recent years, Bellwright seemed to be firing on all cylinders, with sales topping $25 million in 2004.

It was that same year that a lucrative long-term deal with a German company called ZF Industries Inc. lapsed, setting off a cataclysmic chain of events that ultimately led to Bellwright's bankruptcy filing, according to Kenneth J. Waterlander, president and part owner.

The loss of the ZF contract was painful but not fatal. Bellwright's disadvantage was its size — it was not equipped to compete for the much larger follow-up gig, Waterlander said. That left the machine shop with excess production capacity and not enough revenue to pay the swollen overhead.

An effort to fill the gap gained some traction, only to lose steam when another customer suddenly halted production, Waterlander said. Bellwright then went into retrenchment mode.

Most clients stuck with the company, but not all. Waterlander said the near-death blow came in late June last year, when a major customer, aware of Bellwright's mounting difficulties, "just cut us off." The bankers did likewise. Just before the July 4th holiday the company called an employee meeting and closed the doors, only to reopen within the week.

"Our philosophy is, where there's life, there's hope," Waterlander said.

After yet another major revenue source vaporized last year, F. Andrew Wright, the company's semi-retired chairman and co-founder, decided to seek out an investor or buyer to stem his losses.

Waterlander said Bellwright hoped to avoid a trip through U.S. Bankruptcy Court, but time ran out. The company listed assets of $2.5 million and debts of about $8.8 million in its March 18 filing.

Despite the setbacks, Bellwright is still ticking, but its business is down sharply. Revenue is estimated to total $8 million for 2008, compared to more than $15 million in '07. Raw materials must be paid for at the time of delivery. "We're a small company now with a big company hangover," Waterlander said.

The sale to Mid-State Machine is the only apparent means for survival, he added.

"The result for Bellwright is the employees remain in place, the customer base remains in place," Waterlander told Joseph Buzhardt, a Justice Department trustee who presided over a meeting of creditors Thursday.

The purchase price has not been disclosed yet. Mid-State Machine would assume all of Bellwright's secured debt and equipment leases. "There are some synergies that could be developed if we can pull this thing together," Waterlander said.

Also, an undetermined pot of cash would be divvied up among Bellwright's unsecured creditors, including more than 100 current and former employees who are owed money.

Toward the end of Thursday's proceedings, Buzhardt posed the critical question: What if the sale doesn't go through for some reason? In that case, Bellwright's prospects would be grim, Waterlander responded. Customers likely would lose confidence and shift their business elsewhere, he said. It went without saying what would become of the remaining 41 workers. "We will eventually collapse," Waterlander predicted.

Reach John McDermott at 937-5572 or jmcdermott@ postandcourier.com.