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GT Seeks to Void 'Oppressive and Burdensome' Agreements With Apple, Outlines Sapphire Wind Down Process
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GT seems to have struck a surprisingly large blow against US manufacturing. Whether they win or lose the court filing, the message will be that if you hire a high tech US manufacturer they may srew you over and the sue you.
Are you really suggesting that when a company is in BK (or even, arguably, in the zone of insolvency) that its duties run only to its...shareholders?
HobeSoundDarryl
macrumors G5
As I stated earlier, GTAT bet the farm on Apple and signed a contract, if I understand it correctly, was just plain stupid!
In hindsight, it looks plain stupid.
If you go back to the time they struck the deal, they had Apple (APPLE!) wanting to give them lots of money to make a part for Apple's most famous, most important product. It might have been the biggest source of revenue the company had ever seen if they could deliver on whatever Apple wanted by the point in time when Apple wanted it. If they could do it, the executives would probably get very rich AND be within the Apple halo (Apple would be touting something they made as part of rolling out the new iPhones). If- as some rumors implied- their deliverables were only for the 6+, it seems reasonable to assume that the next model might bring Sapphire to the the other model when we get to 6s and 6s+ time. So, if it did look like that, the forward-looking view would be HUGE revenue in 2014 and larger orders in 2015 and potentially years of larger and larger orders beyond 2015.
What's the biggest downside? Well, this one that appears to be playing out right now. No Apple orders. No Halo. No huge compensation. No record sales. No future larger sales. Executives and employees out of jobs. Share prices fall to near nill. Hate messages probably pouring in from shareholders and employees. Etc.
So yeh, in hindsight, company-killing deals always look "plain stupid". But if you go back and look at them when they were being struck, the possible scenarios are never only the "plain stupid" one.
That's what they're doing.
Their apple contract prevents them from selling to anyone but apple, and apple had refused to buy the sapphire. So they have no other option but to declare bankruptcy.
I agree that they must have salivated to get hooked up with Apple, and taking big risks can have big pay days! IMO they should have some kind of back up plan. It just doesn't sound good from the start, if in fact what I read is true.
Apple put the contract in place. They wanted exclusive access to the sapphire. Now apple don't want it and GT can't sell it to anyone else.
If they emerge from 11 and do not file 7 then the shares will increase in value. From the technicals I have seen, if they are able to discharge debt and restructure their contract with Apple allowing outside sales then they will probably not enter 7.
Then again, like any BK stock, you are taking a risk.
That's iff the current shares aren't canceled (coughDeltacough). Big risk to take.
Look, I get what you're saying but this isn't that simple. A good business doesn't try to squeeze every last dime of risk out of a partner every time a contract is signed. You need partnerships to work in order to build a lasting business. If GTAT went to bankruptcy over terrible terms from Apple or an abusive contract then that is on Apple quite a bit, who should know better. Personally, however, I think something else is going on.
The question is who's fault is it that sapphire glass was not used on the iphone6? I remember reading that the glass cutting company in Asia was unable to cut the glass fast enought so the sapphire was shipped back to the factory.. Why didn't Apple continue the contract/payment with GT to stock pile sapphire for the iphone 6s? Apple could have continued to do business with GT but they simply just cut the plug while they had an exclusivity deal.. how is GT supposed to stay afloat without the cash flow? The 500 milion was used to purchase extra funaces, the larger Arizona factory, as well as to pay employees.. but if there is no cash flow then how are they supposed to support themselves!? Apple saying that they are surprised about the chapter 11 doesn't help or pay the bill at the end of the day and extending the loan payment date doesnt mean that they are exonerated from still owing Apple. I know that to some people Apple can do no wrong but.....
I agree that they must have salivated to get hooked up with Apple, and taking big risks can have big pay days! IMO they should have some kind of back up plan. It just doesn't sound good from the start, if in fact what I read is true.
GTA looked like a one-trick pony. They only had one viable product. And seems like they could only find one viable customer (Apple). They only had one thing they knew how to make, and one customer that took interest. I doubt they had a backup plan.
That they filed Chapter 11 Bankruptcy is proof enough that they want to preserve the business.
But if nobody is buying the sapphire they have already produced, what makes them believe that someone will buy the sapphire they have in-process and wish to finish producing?
That is the disconnect for me with that analyst argument - especially when those analysts were the ones proclaiming that sapphire was going to be used extensively in the iPhone 6 family.
WRONG: It certainly is NOT proof that they want to do anything. It just as well might be that they filed Chapter 11 to misdirect the fact that they failed and didn't want to appears as if they just took the money and ran.
Apple bought that factory and equipment relying on promises from the company. Apple is, Im betting the main creditor and will end up owning it all either way.
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Have you ever noticed that people who get caught with 20 bodies in their back shed always please NOT guilty? Its a legal ploy, nothing else.
Is it because the $500,000,000 worth of furnaces Apple paid for and are entitled to keeping are garbage? I hope not for Apple's sake.
The deal went south because of "Issues with poor yield" = The furnaces are bad, or some other step in the manufacturing process is bad, the time frame was too optimistic, or whatever sapphire slicing/lamination process Apple wanted to use was faulty.
If GT is so quick to bail on the entire operation clearly something went very wrong. I'm guessing it's a technical problem.
The deal went south because of "Issues with poor yield" = The furnaces are bad, or some other step in the manufacturing process is bad, the time frame was too optimistic, or whatever sapphire slicing/lamination process Apple wanted to use was faulty.
If GT is so quick to bail on the entire operation clearly something went very wrong. I'm guessing it's a technical problem.
OR.... GT failed to live up to the spec they promised.
If Apple just went ahead with substandard screens, who would have to replaced the 16 million iPhones they sold the first week. Apple, Not GT. Apple opted out. Imagine the PR nightmare.
Good business move if you ask me.
As far as I know their other income streams are negligible, so it is quite a stretch to call whatever will be left over after winding down the sapphire operations is "continuing to execute our business plan".
They once had a furnace manufacturing business, but now that there is a glut of them in AZ, I doubt that is going to be viable option for a long while unless Apple finds a way to put them to good use. (As the largest creditor, I assume Apple will end up owning most if not all of them. I guess it will either sell them at an auction or use them.)
OR, Apple is the guy at the gate who had been bumped off three flights and is missing a meeting that may as well cost him a billion dollars and is now pissed off. Wouldn't you be?
It's all speculation from all of us now, of course. But you may be on to something here. In hindsight, this might be a "black eye" for Cook at this time, but in the long term it's possible that history might prove that "Apple abandoning sapphire" was the best technical decision they made. Who knows, maybe 3 years from now, there will be tons of studies proving that sapphire simply could not hold a candle to Gorilla Glass 3.0 or GG 4.
The screwed up big time.
their response is just legal tactic - "Oppressive and Burdensome contract" is just their reasoning they cite to have the Judge rule the contract invalid - if he buys it (and I hope he does not)
Its a very bad precedence for any high tech company trying to bring manufacturing back to the US.They took the cash in return for performance.
They should have fetched up to the facts that can't make their yields, instead they lawyered up. Just like one Danny Devito's "Other Peoples Money" - Lawyers are like nuclear weapons - you have them because they have them too - once you use them the f..k everything up.
Fell sorry for the employees - they got shafted, to bad - I hope their skills are needed elsewhere
As for GT - screw you - go away - you shame American Manufacturing !
their response is just legal tactic - "Oppressive and Burdensome contract" is just their reasoning they cite to have the Judge rule the contract invalid - if he buys it (and I hope he does not)
Its a very bad precedence for any high tech company trying to bring manufacturing back to the US.They took the cash in return for performance.
They should have fetched up to the facts that can't make their yields, instead they lawyered up. Just like one Danny Devito's "Other Peoples Money" - Lawyers are like nuclear weapons - you have them because they have them too - once you use them the f..k everything up.
Fell sorry for the employees - they got shafted, to bad - I hope their skills are needed elsewhere
As for GT - screw you - go away - you shame American Manufacturing !
If the senior management of GTAT just wanted to "cut and run", they would have filed a Chapter 7 Bankruptcy, which would have ended the company. All of the assets would then be sold and the proceeds distributed to the creditors (first the secured and then the unsecured).
By filing a Chapter 11 Bankruptcy, the management has signaled their intent to reorganize the company. A logical outcome of this reorganization would be to divest themselves of the sapphire manufacturing deal they have with Apple along with the related assets (including the Arizona factory and it's staff).
I would not be surprised if the reorganization plan that management submits to the Bankruptcy Judge and Creditor's Committee would be to sell the assets related to the Apple deal (either to Apple or some other entity) and return to their previous role as a supplier of sapphire production furnaces for other customers (of which I imagine there will still be demand).
I agree, my question to "akatsuki" was very honest. He seemed to know a lot about the law and insinuated that most comments here were off the mark. I agree with your statement, I'm simply curious as to specifics, and not meant sarcastically.
Thank you! I find the law in these matters very interesting, especially as more and more people are entering into new business territory. It's important to know if business goes south what the consequences maybe for Chapter 11, 7 and 13. Thanks again for the info.
PS I didn't critique anyone as an armchair lawyer, that was the comment from "akatsuki". I don't have any opinion on anyone's comment as I am not a lawyer, but the gist seem to be on the same page. (and I'll happily pay your fee's lol)
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