Energy Conversion Devices Inc., ECD, has joined three other solar manufacturing companies in the last year that have filed for Chapter 11 bankruptcy protection blaming over production and a loss of government subsidies, as reported by The Detroit News.
ECD filed in the U.S. Bankruptcy Court Eastern District of Michigan. It’s the company’s desire to sell off its United Solar Ovonic subsidiary along with other assets.
Michael Schostak, the spokesman for ECD, said, “What would happen to Energy Conversion Devices is that it would be wound down. It's essentially a break-up of the company.”
The decline of the solar manufacturing industry is blamed not only on too much production and a decline in government subsidies; it also claims that waning prices for solar energy is responsible.
Several analysts saw the demise of ECD and predicted the bankruptcy – they noted that a payment of $263 million was due on notes by June 2013.
The Auburn-Hills based company has stopped all production in the United Solar Ovonic plants back in November 2011. At that time ECD noted they had produced more than they could sell. As inventory had piled up, 400 manufacturing employees were furloughed and another 500 employees were slated to be laid off.
In the company’s fiscal year that ended June 30, 2011 they saw losses of $306.4 million. Most of the losses came from the United Solar Ovonic plants over the past two years. But the battery manufacturing – through the Ovonic plants – made a profit for the past three years.
ECD hasn’t made a profit since the start of 2009.
Schostak said, “In the last month or two, it's become apparent that again to attract the capital we need to grow the business and give us the maneuverability and flexibility to operate the business, we needed to have a clean financial slate.”
News of the bankruptcy filing caused ECD’s stock to fall 80 percent on February 13.
United Solar, a subsidiary of ECD, also filed for Chapter 11.
Julian Hawkins, ECD’s president and CEO, released this statement: “We firmly believe there is a strong and sustainable commercial market for Uni-Solar products. USO's next-generation, 12 percent efficient, flexible photovoltaic products build upon 25 years of PV experience and enable highly competitive production costs with a fundamentally differentiated product. However, our current capital structure and legacy costs are preventing USO from making the investments necessary for the future of the business without restructuring through the bankruptcy process.”
But Stephen Simko, an analyst with Morningstar Inc., said that ECD will not be of much interest for purchase due to their competitors having higher profitability. Simko said, “This is going to be a pennies-on-the-dollar kind of sale.”
Between ECD and United Solar there are approximately 750 employees, including those on furlough. Schostak said that 60 percent of the workers live in Michigan.
Schostak also said that the company posted a “substantial loss” for the period ending December 31 but will not file a quarterly report.
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