Alvance Aluminium, part of the GFG Alliance Group, confirmed April 26 that its three downstream engineering businesses in France have been placed into voluntary administration on structural market changes and a lack of working capital.
This follows the collapse of GFG Alliance's major financier, Greensill Capital, in March.
The reported existence of a Eur2 million ($2.42 million) loan from the French government to support one of the businesses was not immediately confirmed.
A French court approved the judicial administration status of the three businesses April 23, GFG Alliance said. They are the Poitou iron and aluminum foundries and the Chateauroux aluminum wheels factory, which has been France's biggest aluminum wheel maker.
"All three businesses have faced structural changes in their markets which have been compounded by Covid-19 and a reduction in working capital support available from GFG Alliance following the collapse of Greensill Capital," a GFG spokesman said in an emailed statement. "We welcome the tribunal's decision, which we believe to be in the best interests of the workers and will provide the best chances of a sustainable outcome for the businesses. We will provide the administrator with any help and support required in taking the process forward."
This decision does not affect or include Alvance's other sites -- smelters Alvance Aluminium Dunkerque in northern France, Alvance British Aluminium in Lochaber, Scotland, and downstream products producer Alvance Aluminium Duffel in Belgium, all of which are operating normally, benefiting from strong market positions and are cash flow positive, GFG Alliance said.
LME primary aluminum cash prices closed April 26 at $2,403/mt, up 1.36% on the day and at a three-year high partly on concerns that supplies might dwindle amid Chinese plans to curb production at coal-fired smelters.
Unsustainable
All three engineering sites now in administration had been loss-making since their acquisitions in 2018 (for the wheels operation) and 2019 (for the foundries) by GFG Alliance, which planned to turn them around and create greener operations as part of the group's broader industrial development strategy.
According to sources close to the parent group, GFG Alliance has pumped almost Eur44.5m into these operations to keep them solvent. However, they suffered from shrinkage of orders because of the coronavirus pandemic, and their position became unsustainable after the collapse of Greensill Capital, a major financier of GFG Alliance, in March, the sources said.
Specialist aluminum sector publication Alcircle reported April 26 that the French government is guaranteeing a Eur2 million emergency loan to the aluminum wheels plant for cash flow until a buyer is found or until French carmakers take the volumes they committed to when the plants were first bought by Alvance. The plant's situation is expected to be reviewed in June under the judicial administration.
Current production levels at the three plants were not immediately confirmed.
The aluminum wheels plant reported in September 2020 that it had won a contract to supply Tyre-Line Original Equipment, a tire assembly company active in the UK and European leisure vehicle markets, with over 35,000 aluminum wheels per year in sizes ranging from 14 to 16 inches, using aluminum produced at Alvance's Dunkirk smelter.
Union talks called off at Poitou foundry
Sources said GFG Alliance has been in discussions with unions and other stakeholders at the Poitou iron foundry since December 2020 about the winding down of the business, following a 75% downturn in contracted orders from principal customers and the pandemic's major impact on the automotive industry. These talks, however, were recently suspended at the request of the unions.
Both the aluminum foundry at Poitou and the wheels plant at Chateauroux have suffered from declining orders and a reliance on either a single customer or small numbers of customers ordering small volumes, sources said.
The sources indicated, however, that the aluminum foundry could be made viable with the time that an administration process could offer it to improve its business opportunities.
