Car and Truck Hauler Allied Systems Files for Chapter 11 Bankruptcy
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Car and Truck Hauler Allied Systems Files for Chapter 11 Bankruptcy

June 28, 2012


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Allied Systems Holding Inc., which transports vehicles from manufacturers to dealers, filed for bankruptcy this week, only days after its creditors threatened to file an involuntary Chapter 11 petition, according to a Reuters report.

The company, which is majority owned by a private equity firm called Yucaipa Cos, is based in Atlanta and has 18 different subsidiaries in the United States and Canada. Sources indicate that the company filed in U.S. Bankruptcy Court in Delaware, and that this is Allied’s second bankruptcy filing in just seven years.

The recent recession dramatically reduced the American demand for new cars, as many consumers postponed the purchase of new vehicles, and this took a serious toll on every supplier involved in the complex web of the car industry. Allied Systems was no exception.

As car dealers sold fewer cars, Allied’s services were no longer in high demand, and the company saw its revenues decline by 27 percent in 2011. This decline came on the heels of 58 percent drop from the revenues it earned in 2007, before the economy took a nosedive.

As vehicle sales started to slow in 2008, the company lost contracts it held with major car manufacturers, including General Motors, Chrysler, Toyota and Honda. And more contract losses occurred after the company decided to raise its rates last March.

The company’s financial struggles began in earnest in 2009, when it reportedly decided to stop making some loan payments. This decision came after General Motors and Chrysler, two of its major business partners, entered bankruptcy protection later that year.

Of course, both General Motors and Chrysler had record-breaking recoveries after filing for bankruptcy, so Allied Systems reportedly hopes that its bankruptcy outcome is equally positive.

Allied is mostly owned by Yucaipa Cos, which is operated by Ronald Burkle, the colorful billionaire who recently launched an unsuccessful campaign to take over the board of directors of bookseller Barnes & Noble.

Burkle and his company purchased a 63 percent stake in Allied after the company filed its first bankruptcy, which was resolved in 2007.

The company has almost 2,000 employees and it is looking for an addition $20 million in financing so it can keep functioning during its bankruptcy case.

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