DETROIT — Adient plc is looking for cash to shore up its balance sheet after it closed operations in North America and Europe during the global COVID-19 outbreak.
The automotive seating supplier on Monday said it plans to raise $500 million in a private offering, using its assets as collateral via a secured note. Adient said it estimates its cash burn is averaging $175 million per month during the crisis.
The $500 million offering stems from the company’s banks decreasing its available credit due to declining value of assets. On March 20, Adient announced it would draw down $825 million of its revolving credit to bolster its cash on hand and would have $2 billion in liquidity. The draw-down portion of its credit has been reduced to $688 million, Adient said on Monday.
On March 23, Adient cut employee salaries by 20 percent in an effort to remain solvent during the crisis. The company did not respond to inquiries concerning how many employees face the cut. The company employed about 1,300 nonplant salaried employees in the U.S. in November.
The cuts include the salary of CEO Doug Del Grosso and the company’s board of directors. Del Grosso earned a salary of $1.15 million with an $800,000 bonus in 2019. His total compensation package was worth approximately $15 million, but a bulk of that value was linked to stock awards that likely plummeted in value.
During the company’s fiscal second quarter, which ended March 31, COVID-19’s impact was muted at only $100 million. However, global sales overall during the quarter are expected to be down about $700 million to $3.5 billion from the same quarter last year, the company said in a preliminary quarterly earnings release.
The supplier is a large player in China, and the outbreak started impacting plants, and profitability, there in January. However, all 79 Adient plants in China, including Wuhan where the outbreak began, have reopened, the company said.
“Adient’s preliminary Q2 results demonstrate the improvement phase of the company’s turnaround plan continues to accelerate. Excluding the $100 million negative impact stemming from the COVID-19 crisis, Adient’s second quarter results were on pace to significantly outperform (2019’s second quarter results),” Del Grosso said in a statement.
“The team is acting quickly and decisively to execute actions designed to reduce the company’s cash burn rate and increase liquidity.”
Adient plans to announce its final second-quarter results May 5.
Shares of Adient have plunged more than 60 percent from their 2020 peak at $28.24 on Feb. 20. Shares fell 3.75 percent to $10.77 in early trading on Monday.
Adient, based near Detroit in Plymouth, Mich., ranks No. 13 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $17.4 billion during its 2018 fiscal year.
