My goodness. It sounds like he was basically running a ponzi scheme... Using one set of recievables collateral to take out multiple loans, then getting shut off from mainstay lenders, and THEN maxing out with predatory lenders.
It's pretty astounding to me that a company worth tens of Billions(!) of dollars doesn't have a third-party accounting/legal firm looking over the financials to ensure compliance. That's absolutely insane.
Noddaz said:I was surprised on how many duplicate lines he company has. Trico and Anco wipers. Raybestos and Centic brakes. Airtex and Carter fuel and water pumps. What the heck? It almost looks like they are in competition with themselves.
Not really if the brands have different price points
Legacy higher end brands Anco / Raybestos / Carter
Lower end brands Trico / Centric / Airtex
Even if the brands turn not not to have differing price points, they cover those that say " I'll never buy X because I had a bad part 20 years ago so give me Y ". And of course there is another person saying " no to Y and asking for X " .
Note that aftermarket parts makers frequently make parts for new car brands as auto makers "make" very little of a car.
golfduke said:My goodness. It sounds like he was basically running a ponzi scheme... Using one set of recievables collateral to take out multiple loans, then getting shut off from mainstay lenders, and THEN maxing out with predatory lenders.
It's pretty astounding to me that a company worth tens of Billions(!) of dollars doesn't have a third-party accounting/legal firm looking over the financials to ensure compliance. That's absolutely insane.
So where do we think all the money went?
David S. Wallens said:golfduke said:My goodness. It sounds like he was basically running a ponzi scheme... Using one set of recievables collateral to take out multiple loans, then getting shut off from mainstay lenders, and THEN maxing out with predatory lenders.
It's pretty astounding to me that a company worth tens of Billions(!) of dollars doesn't have a third-party accounting/legal firm looking over the financials to ensure compliance. That's absolutely insane.
So where do we think all the money went?
I'm no financial analyst, but I would assume with him as the sole stakeholder, lots of it went to lifestyle expenses. It's also really expensive to acquire companies that weren't looking to be acquired. In his sort of shooting the moon, he probably paid top dollar for these brands, was leveraged from the jump, and was paying predatory levels of interest on the notes. Add in just completely blatant fraud in hiding debt in non-balance sheet debt (not reportable on bank applications), and you get this epic failure cascade.
My bet is, and this is where it relates to Ponzi schemes- that there wasn't actually all that much liquid cash on hand in any phase of this company's trajectory. It was all a shell. The only way moves like this pay off is if you can acquire enough market share to monopolize market segments, then you can control production and sales. He ran out of time, money, and talent before getting there...
FWIW, Madoff got 150 years. Different circumstances, of course. Just sharing.
David S. Wallens said:golfduke said:My goodness. It sounds like he was basically running a ponzi scheme... Using one set of recievables collateral to take out multiple loans, then getting shut off from mainstay lenders, and THEN maxing out with predatory lenders.
It's pretty astounding to me that a company worth tens of Billions(!) of dollars doesn't have a third-party accounting/legal firm looking over the financials to ensure compliance. That's absolutely insane.
So where do we think all the money went?
“money” (picture my air quotes). A lot of the time when there’s fraud in companies like this, it’s because they booked a bunch of paper transactions that didn’t correspond to any movement of cash or physical goods that have real value. GAAP accounting rules are supposed to prevent this, but sometime people get creative with the accounting. I bet his lenders are answering some very hard questions right now.
David S. Wallens said:FWIW, Madoff got 150 years. Different circumstances, of course. Just sharing.
I'm gonna wait to see who ultimately loses the money he "misplaced" before I'm willing to estimate his position on the Madoff-Tucker scale...
A great quote I read recently:
Barry Minkow, a businessman jailed twice for fraud, was at least honest: “Accounts receivable are a wonderful thing. They are a tool that is used by a fraudster like me, to ask to borrow money mainly, and to show earnings.”
I laughed when I read this
The Indian businessman immigrated from Malaysia in the 1980s to attend a small college in Ohio. James went on to live the American dream. He built an auto-parts colossus with 26,000 employees and billions in annual sales by scooping up smaller companies. His children went to elite U.S. colleges, and the family relaxed at their $23 million Malibu, Calif., mansion with sweeping views of the Pacific.
A business scandal has shattered that dream.
Then this
WonkoTheSane said:It's refreshing that it looks like good old fashioned fraud as opposed to private equity games.
lol
I was going to post about this whole mess a while back. I'm familiar with a lot of these brands as an ex-parts slinger, and up until recently, I've been using a bunch of them on my own cars. Some of them have been pretty decent over the years (like Airtex and Carter) while some have been suspect (A-1 Cardone has been awful for a long time). I have recently observed that a couple of the more "trustworthy" brands, namely Raybestos and Trico, have had MAJOR quality issues when compared to their own past products. This company has been buying everything up and cutting quality to maximize profits. It sucks to see this happen to the industry, but First Brands deserves what's coming to them. They aren't the first to have this happen, and they certainly won't be the last.
In reply to Tony Sestito :
" This company has been buying everything up and cutting quality to maximize profits."
It's more than just that. Cars are generally more reliable , need fewer repairs and when they do, the car is getting near end of life for the average driver. ( not us mind you as we can easily keep a car going for another 100 K . ) Walk around a self serve salvage yard and look at how many parts are original.
For the person that defers maintenance and runs a car into the ground, PRICE is the only consideration. This gives rise to lower end parts from storied brands like Moog's R series and Standard's T series. Sure, the parts don't last long as OE but they don't have to as the car is headed for the scrap yard in a coupe of years.
This is classic case. Use current receivables to get through the near time..............eventually the debt load swallows up the whole thing.
Happens at all levels of business.
Masher_Mfg said:In reply to Tony Sestito :
" This company has been buying everything up and cutting quality to maximize profits."
It's more than just that. Cars are generally more reliable , need fewer repairs and when they do, the car is getting near end of life for the average driver. ( not us mind you as we can easily keep a car going for another 100 K . ) Walk around a self serve salvage yard and look at how many parts are original.
For the person that defers maintenance and runs a car into the ground, PRICE is the only consideration. This gives rise to lower end parts from storied brands like Moog's R series and Standard's T series. Sure, the parts don't last long as OE but they don't have to as the car is headed for the scrap yard in a coupe of years.
conversely, cars are staying on the road longer than ever. The average age of the US fleet has never been older. Cars in the scrapyard are more likely to be there due to a collision than being worn out so that’s not a great sample to use.
As for buying parts on price - hands up if you shop at Rock Auto…
In reply to Tom1200 :
[Sarcasm] Leverage isn’t risky, keep the debt and invest the difference, make the spread,… [/Sarcasm] This guy took that philosophy to the nth degree.
The worst part is that a lot of good folks will probably lose jobs, benefits, etc because of this guys hubris and greed.
Masher_Mfg said:In reply to Tony Sestito :
" This company has been buying everything up and cutting quality to maximize profits."
It's more than just that. Cars are generally more reliable , need fewer repairs and when they do, the car is getting near end of life for the average driver. ( not us mind you as we can easily keep a car going for another 100 K . ) Walk around a self serve salvage yard and look at how many parts are original.
For the person that defers maintenance and runs a car into the ground, PRICE is the only consideration. This gives rise to lower end parts from storied brands like Moog's R series and Standard's T series. Sure, the parts don't last long as OE but they don't have to as the car is headed for the scrap yard in a coupe of years.
Aftermarket parts quality isn't an issue for longevity, it is the ability to function in the first place.
I cannot get Honda Accord rear calipers that work. They all, -ALL-, have screwed up handbrake mechanisms. Not only does the handbrake not work, but the caliper pistons don't adjust. They retract back into the caliper, causing a low brake pedal when the pads are new, that only gets worse with wear.
Many electronic components are simply out of range. Test the resistance on an aftermarket leak detection pump for a VW and it will probably be wrong. "Can't we use it anyway? It's new!" "We can use it but they will be back in a couple days with the MIL lit and then we will be putting the dealer part on anyway, only now WE will be paying for it"
MAFs. I hate Amazon. Someone gets a plugged PCV system or dirty throttle body and computer sets a MAF correlation code. So, since "the code said bad MAF" they buy a $60 unit from Bob's Mystery MAFs from Amazon. Which doesn't fix the problem, then it comes to me, I repair the original issue and it still is running incorrectly because the MAF is characterized wrong, so I recommend a new OE MAF or reinstall the old one. They threw out the old one and get upset that an OE MAF is $500 when they can buy a new one on Amazon for $60.
A lot of people on the industry are tired of this E36 M3 and insist on using OE parts only for anything electronic or that takes more than 10 minutes to R&R.
When I talk about the quality going downhill, I am not talking about just major component parts; I'm talking about general maintenance items made by these brands that used to be great but aren't anymore.
Case in point: Trico wiper blades.
I've been using Trico wiper blades for 20+ years after having quality issues with other major brands like Anco and Bosch. Since they were introduced, I've been using whatever Trico's premium line is for beam-style wipers (for a while, it was the NeoForm, but I believe it is the Edge now). The past few times I've purchased them, I've noticed that they are wearing out and streaking earlier and earlier. And on top of that, the prices have been going UP.
Another one: Raybestos.
I have been also using their brakes, especially their Element 3 line, for most of our daily drivers and when I do brake jobs for family/friends for some time now. They were my go-to and recommendation for reliable brakes. Last few times, the rotors have been especially bad, and the pads have worn quicker than usual. Again, not sure what's going on here.
All I know is that stuff that has been generally reliable for years from trusted brands has gone to crap lately, and it's no coincidence these brands are owned by First Brands.
In reply to Peabody :
Exactly the juxtaposition I was going for :)
In reply to WonkoTheSane :
Well, there's that, and the statement that he went on to live the American dream, but a business scandal shattered that dream, as if the scandal was something caused by some other force, or something out of his control.
I enjoy watching true crime shows, a few in particular, and American greed is one of them where the American dream is mentioned often enough that I really believe the modern day American dream is to scam people out of millions, or billions of dollars and not get caught. That statement reinforces it.
Keith Tanner said:conversely, cars are staying on the road longer than ever. The average age of the US fleet has never been older. Cars in the scrapyard are more likely to be there due to a collision than being worn out so that’s not a great sample to use.
As for buying parts on price - hands up if you shop at Rock Auto…
In road salt areas, the bottoms of the cars fall out in 15 or so years.
Full service yards get mostly crashed late model cars and some newer but rusted out stuff on the fringes. Self serve yards get mostly older worn out stuff with maybe 10 % crashed or picked over full service shells.
tester (Forum Supporter) said:In reply to Tom1200 :
[Sarcasm] Leverage isn’t risky, keep the debt and invest the difference, make the spread,… [/Sarcasm] This guy took that philosophy to the nth degree.
The worst part is that a lot of good folks will probably lose jobs, benefits, etc because of this guys hubris and greed.
Exactly. Someone lost money.
Keith Tanner said:This is why Bill Cardell worked so hard to make sure Flyin' Miata ended up in the hands of his employees.
I wish more companies did that.
spitfirebill said:Keith Tanner said:This is why Bill Cardell worked so hard to make sure Flyin' Miata ended up in the hands of his employees.
I wish more companies did that.
Most employees and customers probably agree with you
Pete. (l33t FS) said:
They threw out the old one and get upset that an OE MAF is $500 when they can buy a new one on Amazon for $60.
To be fair, at $500 I too would try the Totally Not from AliExpress Amazon Special first if I didn't know better, and then once I knew better I would try to engineer a replacement MAF from scratch.
David S. Wallens said:tester (Forum Supporter) said:In reply to Tom1200 :
[Sarcasm] Leverage isn’t risky, keep the debt and invest the difference, make the spread,… [/Sarcasm] This guy took that philosophy to the nth degree.
The worst part is that a lot of good folks will probably lose jobs, benefits, etc because of this guys hubris and greed.
Exactly. Someone lost money.
Either his investors' Wall Street Casino bets in which case we might expect a Bernie Madoff-like sentence, or his employees' livelihoods (which could also lead to a nasty car part shortage if a bunch of these companies all go through bankruptcy at the same time) in which case it will likely be more Scott Tucker-like.
GameboyRMH said:Pete. (l33t FS) said:
They threw out the old one and get upset that an OE MAF is $500 when they can buy a new one on Amazon for $60.To be fair, at $500 I too would try the Totally Not from AliExpress Amazon Special first if I didn't know better, and then once I knew better I would try to engineer a replacement MAF from scratch.
That isn't the perspective. The perspective is "omg you are ripping me off, I can get one for $60"
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