GT Seeks to Void 'Oppressive and Burdensome' Agreements With Apple, Outlines Sapphire Wind Down Process

[mabhatter]

What??

GT signed a BUSINESS contract with Apple. Apple has no obligation or "moral" reason not to hold them to their agreement. How is Apple being a bully? They loaned GT half a billion dollars, and since this story broke, Apple has said that at this time, they are not looking for the repayment of their loan. So where does "bully" and "arrogant" come in?

No, Apple loaned them $350m .. Apple decided to be very late on the last payment. Therefore GT cannot pay its bills, therefore shut the doors and stop losing money.

I'd venture GT's agreement with Apple was to let Apple be FIRST to market... Except Apple's not buying stuff on schedule. They've spent $400m+ and don't have customers. Contractually they probably have to wait until Apple is ready... Next year... Before they can even sell what they are making right now.

Other manufacturers have had the same complaint about Apple not taking product on time. That means they cannot clear the lines of Apple's product to sell something else and keep the lights on. I'm sure Apple would love to use them got Apple Watch... But if you aren't paying me RIGHT NOW... No factory on earth is going to wait 6-9 more months. Thats not how business works. If Apple wants employees to sit on their asses 6 months, then Apple can hire and pay them. Otherwise the sapphire plant closes because it's not MAKING MONEY.

 

[cjgonzales1900]

Wait I thought the original agreement was that if GT didn't pay back the loan that apple got all the equipment they bought with it? So how are they going to plan on selling it, and apple doesn't get anything back. I take it that apple might just buy the company since they already have 500,000 invested. It would look good on apples part saving the jobs of GT employees. Im not worried about apple losing money they have plenty. But those people losing their jobs, now that sucks.

 

[The Monkey]

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).

The majority of companies file under Chapter 11 regardless of their intentions to sell off the whole thing or reorganize. It affords much more control over repayment and can maximize return when selling off the business(es). So, I don't know if we can surmise what GTAT's end goal is yet.

 

[mabhatter]

Fixed.

This unfortunately does not bode well for American manufacturing with this outfit looking more and more like an operation run by rodeo clowns.

Apple is supposed to BUY STUFF from them! That's how business works. $400m burns EXCEPTIONALLY fast when you can't sell your product to anybody except one company. If Apple won't take the product, and wants to be secret about when they WILL take the product, then it's time to cut bait and go. THAT is also how business works.

If the product was met for Apple watch, they can't wait six more months to get paid... Sure Apple owes them $150m more.., got OPERATION, not sitting around. Industry awards and knighthoods don't PAY the bills.

 

[tdtran1025]

Lesson to learn, just because u win the heart of the trophy girl, it does not mean u win a prize. It costs dearly to go to bed with Apple.

 

[Solomani]

Lesson to learn, just because u win the heart of the trophy girl, it does not mean u win a prize.

What sort of nonsense are you talking about?

 

[cfedu]

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.

If the problem was the processing of the sapphire boules in china, how will that affect US manufacturing?

 

[Windlasher]

what are you talking about?

Read back.

 

[cfedu]

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 think you are going to had to draw a picture!!!

 

[Windlasher]

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 disagree. Chapter 7 is NEVER a given. All creditors can go to court and ask the court to NOT allow it and sometimes the court doesn't.

Seems like Apple would be in a pretty good position to do this since they built (and paid for) the factory.

When you buy a house, you don't get to just file Chap 7 and keep the house. They might be willing to reorganize the company, but didn't Apple pay for the factory and the furnaces? Like Tim Cook or not, I doubt Apple signed a contact leaving them no legal recourse.

Apple is "probably" in a situation where they can claim ownership of the physical assets but not the IP. They could have that thing restaffed in no time at all and "maybe" license the IP or use another process instead.

BY filing Chapter 11, it gives GT a little leverage in the negotiations. Im going to bet that in a few weeks they will announce that an agreement has been reached and with certain management changes, everyone has agreed to play nice.

----------

The majority of companies file under Chapter 11 regardless of their intentions to sell off the whole thing or reorganize. It affords much more control over repayment and can maximize return when selling off the business(es). So, I don't know if we can surmise what GTAT's end goal is yet.

YUP! Its like serial killers who plead not guilty after they get caught in the act. Its a bargaining ploy.

----------

Lesson to learn, just because u win the heart of the trophy girl, it does not mean u win a prize. It costs dearly to go to bed with Apple.

Are you say that Apple has Syphilis ?

 

[oplix]

Looks like they're chafing under the agreement and have been unable to keep afloat, maybe if apple used them for the iPhone 6, this wouldn't have been an issue.

GT made a point that it's partnership with Apple brought them into the situation they are in right now. They took a big, risky contract to partner with Apple and it bit them in the ass.

The likely reason behind this is a mix of miscalculations of demand, miscalculation of expected profit which could have been affected by the market, and miscalculation of the required flexibility to meet production quotas that would have been aggressively adjusted by Apple in frequent intervals.

 

[betabeta]

First the CEO sounds lost, as far as I know he sold out knowing about the bankruptcy so most likely he is screwed.

Second he who signs an oppressive and burdensome contract and then complains that it is oppressive and burdensome sounds like an idiot.

I can't imagine someone saying this, if this was brought before me I would say did you sign this obviously oppressive contract? Then what the **** were you thinking? Apple would just say oh ok you can't do what you said you could, no problem here is more money?

The CEO is just lucky its not 6 years ago, he has no idea what oppressive even is..

This is going to be interesting.

 

[donnaw]

No doubt. But I imagine there's at least one very good reason Apple didn't use them for the iPhone 6 screens.

But "Oppressive" and "Burdensome" are things they would have best considered before signing the agreements.

(Not that I know anything about Chapter 11 Bankruptcy proceedings. For all I know, perhaps these words simply reference certain kinds of relief that might be provided under Chapter 11.)

More likely the wording is simply 'bankruptcy speak'. In legal briefs certain wording is needed in order to get a expected outcome. One would certainly not expect them to file saying "yeah, Apple was really good, we screwed up but help us anyway'.

Oh, and I remember something about the sapphire boules being delivered on time but that the party responsible for forming them into screens couldn't meet Apple standards or demands. This might be a case where both GT and Apple were at the mercy of a third party.

Whatever the case, this will be interesting. One thing to remember, bankruptcy law is a world all its own. Bankruptcy judges have enormous leeway in their decisions. Many times those decisions hardly seem fair. In fact, rarely does everyone think they are fair. I suppose that's best, everyone gets screwed just a bit. Except the employees, they always get hit the hardest.

 

[mazz0]

sapphire is snappier

That's awesome, cos, like, it has two meanings!

What??

GT signed a BUSINESS contract with Apple. Apple has no obligation or "moral" reason not to hold them to their agreement. How is Apple being a bully? They loaned GT half a billion dollars, and since this story broke, Apple has said that at this time, they are not looking for the repayment of their loan. So where does "bully" and "arrogant" come in?

What's with putting "moral" in quotes? Do you question whether morality really exists or something?

 

[castlerock]

I am not going to bother looking over the contract because I am not Apple's attorney, but there possible are strong arguments that the exclusive contract is still a benefit to GTAT because of its financing deal with Apple. The Monkey was right about the terms being a term of art, the 'Oppressive and Burdensome' was used to guide the court towards this goal of rejecting the executory contracts.

That doesn't seem to be GTAT management / legal's view. They want to shut down their sapphire production. By filing ch. 11, the $440M they owe Apple is due in full. So the financing deal is dead (it's in the filing!). So I'm having a hard time understanding how any of the contracts would therefore still be of benefit.

 

[nutjob]

The "money taken" is nothing relative to what Apple makes. They spent $3B on Beats to buy some of the lowest-rated headphone technology OR the relatively low revenue streaming business OR 2 guys (depending on who chimes in).

Someone do the math on how much Apple makes per day and then compare it to how much Apple might have lost in this if they don't see $1 come back to them. Then someone convert it to a percentage like we were spinning bent phones vs. 10M phones sold. It's going to be nearly nothing.

Some of you guys make it sound like this is Apple last few hundred million dollars.

And there's no "black eye" for Cook either. This will cease to be a story as soon as the next big distraction (probably the new Apple announcements) hit. If you want an Apple black eye, go back to the book pricing arrangement. That was Apple behaving badly at the consumers expense (but spun here of course as preventing Amazon from establishing some kind of monopoly by selling books at or even below cost AND/OR the U.S. Justice Department blowing something way out of proportion (because Apple could not possibly do wrong)). That concluded poorly for Apple and was IMO a "black eye" but we barely even remember it now.

THIS will be quickly forgotten like Ping or Apple suing the polish deli for having a URL a.pl (with the pl being the country code for Poland): http://www.pcmag.com/article2/0,2817,2409669,00.asp Remember those? No? Wait about 3-6 months (maybe weeks) on this story and see if we remember this.

The fact that you open with the notion the value of a dollar is relative to home much other money you have and that you stick with that notion destroys your credibility.

You most likely have never had, or have been responsible for a large amount of money, as in many millions. It's the very opposite attitude is what helps you preserve and add to the money pile. You very much have to understand the absolute value of each and every dollar you have and the risks you take with it. By your logic the $1 trillion spent on the Iraq war was "insignificant," I mean, the US has plenty more where that trillion came from, right?

The fact that Cook has thrown away half a billion dollars because of incompetence will not be forgotten. And that's what it is, incompetence. As the pressure cranks up Cook will most likely preside over more of these gafs. A good question for stockholders to ask themselves is "who would replace Cook if he disappeared for some reason?" The blank they would draw would hopefully give them pause.

 

[kas23]

Apple had their patented iGun pointed at the head of GTAT's CEO as he signed off on the contract and took the big bag of cash from the Playground Bully

Come on. Look at it from both sides. Anyone who knows Apple's history of negotiations knows that Apple only signs contracts that are extremely favorable to Apple. They did so with iTunes. They did so with iRadio. They did so with Apple Pay. And they're in the process of renegotiating the terms of Beats Radio to make them an unprecedentedly more favorable to Apple. This is fine for large corporations to swallow. But not for smaller ones like GT.

Sure, no one forced them to sign the agreement, but I'm sure they were lured by the Apple shiny brand and Apple's chest of gold. To bad they exercised poor judgement and signed the contract.

 

[Rossatron]

Cat's outta the bag: they had no intention to fulfill their loan agreement, so the CEO sold when he thought was the best, and now as a last trick they want to get out of the loan, and probably start a new factory, with Apple's $400 basically given free.

 

[Swift]

Would no one think of the camera lens and home button?!

Home button and the lens are already sapphire-coated.

I'd like to know the real story here.

Apple loaned large amounts of money so the company could tool up to make a lot of money, if they would be selling millions of dollars from the iPhone 6 screen. If they fulfilled the contract, they'd be rich.

Didn't work out apparently. Without those sales they would have had, they couldn't pay the loans coming due. Would Apple not have held off on the loan payments to give them the chance to see if they could get the screens done? Did the CEO just go bonkers, think he had the money in the bank and discovering he didn't?

 

[castlerock]

Cat's outta the bag: they had no intention to fulfill their loan agreement, so the CEO sold when he thought was the best, and now as a last trick they want to get out of the loan, and probably start a new factory, with Apple's $400 basically given free.

Hmm, I'd be surprised if the advance was an unsecured obligation. Most likely the contract lets them repo the equipment in event of default.

 

[irnchriz]

Maybe they knew that they could not supply what Apple wanted..
Maybe the GT CEO took Apples money regardless as he knew that the stock price would rise and then he could cash out 100 million dollars richer before coming clean to Apple.

All we know for sure is that Apple invested money in a plant to be operated by GT and that the CeO of GT made 100 million bucks before the deal went south.

Now it looks like they want to stop Apple taking ownership of the plant and equipment that was part of their contract with Apple.

 

[cocky jeremy]

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.

If they would have actually made as much as Apple needed, they probably would have bought it. Not Apple's fault.

 

[paulrustad101]

you got me...

Would no one think of the camera lens and home button?!

that bug! I waved at the screen to make it go away and it didn't. Kudos!

 

[Gasu E.]

It's so hard being right.

So it's exactly as I said it was, GTA now realizes their product is more valuable then the contract put in place by Apple, and they are trying to get out of it. The court needs to uphold the contract and severely punish GTA.

They are winding down operations, so it's actually the exact opposite of what you just said.

It may be hard being right, but being completely wrong seems to go down really easy.

 

[OatmealRocks]

if it was so "burdensome & oppressive" to be a supplier for Apple, outside of going into an agreement with Apple in the first place, why would the CEO take almost $160K of stock value out of the company if its agreement with Apple created no value?

not $160k that's just most recent trade. He's cashed out $10 million.