Company Update April 17, 2020
This week, sadly, has brought the loss of a second founding owner of Bridgewater Interiors. Team members who have been with us for 10 years or more will remember Mr. Willie Davis’ warmth and grace from board visits and plant tours. Most famous for a professional football career that saw him enshrined into the National Football League’s Hall of Fame, Mr. Davis became an accomplished businessman after retiring from football in 1970. He controlled multiple companies, and owned smaller portions of others, in nearly 50 years as a successful entrepreneur. He was a good partner and friend to my father, and advisor to me, and will be missed.
This week: A Focus on Financials. As we continue the first full month shutdown in our company’s history, I turn the lens to financial management. Despite the GM strike in our first fiscal quarter, we were tracking to have a strong year prior to the pandemic. It’s especially disappointing to lose that momentum, but also an indicator of the team’s ability to recover, and a testament to how much underlying operations have improved in the past year. In the current zero revenue environment, our priorities are (1) lowering costs, (2) maintaining liquidity, and (3) adjusting forecasts for future planning.
(1) Cost reduction. Our primary tools to reduce costs, regrettably, are reducing payroll and benefits expenses. The vast majority of our 2,400 employees are on layoff. Employees with accrued vacation had the option of using it before beginning layoff. Salary team members who are still working during all or part of the shutdown – executives, plant and HR managers, some finance team members, and select others needed for restart preparation – are mostly doing so remotely.
Leader team members have absorbed a 20% pay cut since March 23. An additional 10% cut for those persons is being taken as a deferment from April – July and, pending business results, will be paid then. I am forfeiting the 10% deferment entirely. Our non-employee board members are forfeiting director fees. The Adient executive team and board have absorbed similar adjustments.
We have suspended accruals for all 401(k) account contributions indefinitely. The discretionary match we have historically made, at 75% to 100% of employees’ contributions, is unlikely to happen. Final decisions on 401(k) contributions, and plan changes, if necessary, will be made at the end of the calendar year. In the meantime, I hope that this won’t deter you from making employee contributions to the plan. There is still long-term value in doing so, as John Cloud presented during the Town Hall meetings over the winter.
(2) Liquidity. Without revenue coming in, we need to maintain access to cash sufficient to cover our fixed costs – buildings, health insurance, etc. Bridgewater maintains a significant credit line with a major bank in case we need it. Also, Adient has recently borrowed considerably for additional liquidity, and is exploring still further expansion of its access to capital. This is important to Bridgewater because, as a consolidated joint venture of Adient, the respective borrowing of each firm impacts the other. We are closely aligning with Adient on this topic, and ensuring we maintain sufficient liquidity at Bridgewater to weather the pandemic.
(3) Forecasting. Our current assessment is that light vehicle production and sales will rebound in the second half of the year, after a slow ramp-up upon restart next month. Estimates range from about 20% – 35% drop in North American volume for the year. We are planning on similar drops in year-over-year revenue. An austerity approach to spending will certainly be with us for the remainder of this year.
Other updates:
Production highlights:
- Current planning calls for all programs to restart production the week of May 4th. Several are planning to initially restart with just one shift; your plant management team will keep you posted as to specifics.
- The FCA DS program move to Detroit will be delayed, as production will resume in Warren for several weeks before a June pause; the restart in Detroit is moving to September.
- RECARO assembly operations at Detroit are being extended, likely to late-August.
- Ford P702 launch will be delayed by 6 – 8 weeks.
- GM C1YX will still add a third shift in late May.
Health:
We are now down to just one employee hospitalized for CoV-19. It’s a case that has emerged since the shutdown. The case is serious, but we continue to pray for the team member’s full recovery.
Safety:
Per my update last week, we are making many changes to enhance workplace safety. You will each be receiving a “COVID-19 Return to Work” trifold next week that will begin to explain those changes, and the behaviors we need from you upon restart.
Everyone be well and keep yourselves safe.
Ron
Ronald E. Hall
President & CEO