KENTWOOD — A Grand Rapids-area manufacturing group that made recent and significant investments in the casino gaming machine industry has filed for bankruptcy after accumulating more than $10 million in debt.
The recent filing is a reminder that many local manufacturers are still reeling from the fallout of the COVID-19 pandemic, including swings from periods of low to high demand and the end of federal relief programs.
Laurie Harbour, president and CEO of Southfield-based Harbour Results Inc., said roughly a quarter of the hundreds of manufacturers that her consulting firm regularly polls are still classified as troubled.
“We’re seeing 25 to 30 percent that, unless they change their business dramatically, they’re going to see some fate,” Harbour said. “That fate could be being bought or going bankrupt — there will be some sort of fate, it doesn’t necessarily have to be bad. They’re just struggling financially. The federal (relief) funding is gone and the battle right now on the supply chain issues are impacting people.”
For TG Manufacturing LLC, that fate was Chapter 11 bankruptcy when it and multiple affiliates filed with the U.S. Bankruptcy Court in the Western District of Michigan in late February. The company, which is headquartered at 4720 44th St. SE in Kentwood, includes West Michigan-based subsidiaries A.I.M. Tool & Die, AIM Industries, Craft Steel, and Dorr Industries. TG Manufacturing also owns Tupelo Tool & Die in Tupelo, Miss.
Affiliated companies TGM Coatings LLC and TG Turnkey LLC filed for Chapter 11 bankruptcy in February, while TG Integration LLC — with hopes of retaining financial solvency — filed on March 27.
Owned by Richard Achtenberg with a total of 36 employees, the four companies are represented by Grand Rapids-based bankruptcy and commercial litigation law firm Keller & Almassian PLC. A bankruptcy judge approved a motion to jointly administer the cases.
TG Manufacturing seeks to sell all of the entities as a going concern and has held discussions with multiple interested parties, according to an affidavit and sworn statement by President Kevin Kyle.
TG Manufacturing has shut its doors while TGM Coatings, TG Turnkey and TG Integration remain operational, according to court filings.
Attempts to reach TG Manufacturing were unsuccessful, and Keller & Almassian Partner Todd Almassian declined to comment.
Gambling on gambling
TG Manufacturing specializes in producing material handling and automotive components. Court documents revealed that, at its height, the company generated as much as $20 million in annual revenue.
According to Kyle’s affidavit filed with the court, the company in 2020 lost a contract with a “major customer,” leading to a steep drop in sales. As the COVID-19 pandemic descended on the United States in March 2020, the automotive industry was hit especially hard as vehicle production and its underlying supply chain encountered widespread disruptions.
TG Manufacturing then leaned into a growing segment of its business with the production of casino gaming and entertainment machines, according to the affidavit.
To position itself in the market, TG Manufacturing in June 2020 acquired the gaming machine integration division of Grand Rapids-based Turnkey Fabrication LLC, which operated a 20,000-square-foot facility in Grand Rapids and supplied businesses in the gaming sector across North America, as MiBiz previously reported. That division was then organized under the TG Integration banner.
“Gaming machine production is an exciting sector to be in with tremendous growth potential globally and we are excited to offer some of the most vertically integrated products in the industry,” Achtenberg said when announcing the deal last summer.
The company began its vertical integration strategy in the casino gaming sector the year before when it acquired Grand Rapids-based A2Z Powder Coating, a supplier to the automotive, material handling and gaming industries. The three affiliated entities — TGM Coatings, TG Turnkey and TG Integration — worked together to vertically integrate the process of producing gaming machines.
Similar to the dynamic that played out in the auto industry, the COVID-19 pandemic also rattled the casino industry as brick-and-mortar casinos were temporarily shut down under public health measures.
Prior to the downturn, TG Manufacturing, TGM Coatings and TG Turnkey sought to shore up their finances and tapped Bank of America in 2019 for a $5 million line of credit and a term loan of $2 million, according to court documents. This financing was secured by the assets of all three entities and also personally guaranteed by Achtenberg.
The entities defaulted on the loan, and in January of this year, Bank of America filed a complaint in state court seeking a court-appointed receiver. The three companies owed Bank of America roughly $6.2 million upon the time of filing, according to court documents.
To compound its financial woes, TG Manufacturing also was named in several civil suits in Kent County Circuit Court for unpaid bills that have led to sizable judgments against the company. Over the last year, the company has faced nearly a dozen civil complaints in circuit court.
TG Manufacturing has experienced multiple judgments in favor of the company’s suppliers, including $1.5 million for Benteler Automotive Corp., $561,029 for Chicago-based steel fabricator Lafayette Steel and Aluminum, and $96,563 for Birmingham, Ala.-based industrial supply company GBA Supply Inc. All are classified as unsecured claims in TG Manufacturing’s filing.
While TG Integration initially sought to avoid a Chapter 11 filing, “based on developments that have occurred since the initial cases were filed, it has become apparent that Integration would also need to file a chapter 11 proceeding,” which occurred on March 27, according to Kyle’s affidavit.
Meanwhile, three of the affiliated companies received forgivable Paycheck Protection Program loans totaling nearly $1.9 million between April 2020 and March 2021, according to a program database. TG Manufacturing received $899,450 in April 2020 and another $756,685 in January 2021; TGM Coatings received $145,165 in February 2021; and TG Integration received $90,962 in March 2021.
Harbour and her organization work alongside manufacturers across the country. She underscored the importance of company owners being proactive and making transformational changes within their businesses before encountering disputes with their bank.
“We like to do (turnarounds) proactively and get it before the bank is breathing down your neck and pulling your line of credit,” Harbour said. “But, if they don’t do that, then the bank forces someone in there and then it becomes a full-on restructuring or liquidation or whatever.”
Harbour said manufacturers have seen demand swing in both directions over the last couple of years, with challenges emerging during both high and low periods. During the height of the pandemic, demand dropped and became highly volatile during business shutdowns across the country. When the economy rebounded, Harbour said most sectors saw a roughly 30-percent increase in demand.
“There are two things that kill companies: No business and too much business, and not managing it well,” Harbour said. “A lot of them got through the tough times with federal funding and got too much demand and couldn’t execute.”
For more than a year, bankruptcy attorneys have predicted an increase of bankruptcy filings that still hasn’t materialized. One West Michigan bankruptcy attorney told MiBiz that experts somewhat miscalculated how the pandemic and accompanying federal relief would affect the industry, but that the same fate still awaits.
“Once the pandemic hit, all the big boys filed and then there was a lull and the government pumped out money and there were a lot of accommodations,” said the attorney, who requested anonymity.
“The government money has run out. The tough business people who were organized and in good shape and not reliant on government money, they’ll survive. But I do predict, over the next 36 months now as the economy recalibrates and you see inflation, I think you’ll see more bankruptcies.”
However, some manufacturers remain well-positioned, Harbour said. Companies that were strong going into the pandemic and made necessary adjustments are finding an unprecedented time of new opportunity.
“I have companies that are landing transfer work left and right because the big guys know that so-and-so is going to fall so they call someone else to get the business,” Harbour said.