Eclipse Aviation may be closed but its legacy lives on in the bleeding balance sheets of its local suppliers.
Almost all of the locally owned or locally operated suppliers are still in business today, filling out claim forms for unpaid invoices to submit to U.S. Bankruptcy Court in Delaware. There's little hope that they will see any money when Eclipse's assets are sold off in a Chapter 7 business liquidation.
Sun Country Industries is believed to have taken the biggest hit among local suppliers when Eclipse folded. Founded in Albuquerque in 1950 and now a division of Wisconsin-based McNally Industries, Sun Country is owed about $500,000 in back bills, plus is sitting on an additional $750,000 in parts and material that were slated to go to Eclipse.
While Eclipse is off the hook with its bankruptcy, Sun Country is still liable for the cost of the unpaid inventory, said Ken Hodges, senior vice president and general manager.
"We're still having to pay off our suppliers," he said. "That will go on for another six to seven months because we have payment plans with them."
The largest contract manufacturer for the aerospace industry in New Mexico, Sun Country made mechanical components and assemblies for the flight control systems on the Eclipse 500 very light jet. Eclipse accounted for about 20 percent of its business, Hodges said.
Locally owned Kaehr Corp, a metal finishing shop that has been in Albuquerque since 1954, had only limited direct exposure to Eclipse - about $16,000 in unpaid invoices - but it did indirect work applying primers and high-tech coatings on parts made by other local suppliers to Eclipse.
"Some of our customers were doing quite a bit of work for them," said president Ron Kaehr. "Now they're out anywhere from $100,000 to as much as $500,000."
Some suppliers, such as Kendal Precision Machining, came out virtually unscathed.
Writing on the wall
Stored in Eclipse Aviation's half-dozen or so buildings in Albuquerque is $76.1 million worth of tools, equipment and parts that were never paid for, according to bankruptcy court documents. Fifteen of the 145 companies that supplied all that material are based in New Mexico.
Only one of the 15 New Mexico companies, Maloy Diversified, has closed. The company was formed to make specialized parts for the Eclipse 500 jet, said T.J. Maloy of Waterjet Cutting, whose brother ran Maloy Diversified.
"He saw the writing on the wall two years ago - payments coming late, partial payments, nonpayments - so he closed down," T.J. Maloy said.
Eclipse was never an easy company to work with, according to suppliers interviewed by the Journal. Specifications on tools and parts were subject to constant changes, as were delivery schedules. Payments on deliveries to Eclipse gradually came later and later, eventually reaching 90 days in the second half of 2008.
Kendal Billau of Kendal Precision Machining said his first doubts about Eclipse date back to February 2002, when he first started doing business with the jet maker.
"Just the way it was run," he said. "I kept thinking, 'They're gonna get their act together. They're gonna get their act together.'"
Other suppliers said the same thing. In late August 2008, just days after laying off 650 employees and announcing a slowdown in production, Eclipse hosted a meeting with representatives from 90 suppliers.
Eclipse officials basically tried to rally support from suppliers to help it stay in business, said David Smith of Taycar Enterprises, a precision sheet-metal fabrication shop that made assorted brackets for the Eclipse 500 jet.
"I remember thinking, 'There wouldn't be any problems if you just paid us,'" he said.
The production slowdown was "kind of a shock," Hodges said. The slowdown wasn't mentioned as a possibility when he'd met with Eclipse managers a month earlier, he said.
Most local suppliers had put Eclipse on a credit freeze by August 2008, but continued to make tools, equipment and parts for the company and deliver them on a cash-only basis.
"It was a gamble, but all of us wanted them to succeed," Kaehr said. "There's this whole sub-tier of suppliers that really kept the whole thing going."
Some local suppliers were later offended when Eclipse founder Vern Raburn, who was ousted as CEO in July 2008, blamed the company's demise primarily on problems with suppliers, Smith noted.
Broken promises
After setting up shop in Albuquerque in 2000, Eclipse developed a twin-engined jet capable of seating up to six occupants, including the pilot. After gaining federal certification of the jet in October 2006, the company ramped up production.
The company's initial goal of building one jet a day was never achieved. Eclipse would build and deliver 260 jets between November 2006 and November 2008, or about one jet every three days.
"We had concerns," Hodges said. "We weren't seeing the aircraft come off the line the way it should have."
Eclipse filed for bankruptcy court protection on Nov. 25. Eclipse closed down once and for all in mid-February, laying off all but a few of its remaining 800 workers.
The company's demise coincided with the credit freeze in September 2008 and subsequent slowdown in the broader economy. As a result, for many suppliers, it's hard to separate the impact of Eclipse's failure from the impact of the economic recession.
Sun Country, for example, has seen its employment drop from 124 in July 2008 to 63 in earlier this month. Only about 12 of the laid-off workers can be attributed directly to Eclipse, Hodges said.
Eclipse was not the only factor in the layoff of three employees and a temporary reduction in work hours for the remaining 40-plus workers at Bogue Machine Co., which supplied about 40 different mechanical parts to the jet maker, said Mark Bogue. "If it was Eclipse alone, no change," he said. "Other customers were slowing down orders. Ultimately, it was the economy."
Eclipse's local suppliers were almost all established businesses busy serving existing customers when Eclipse came to town, said Smith. When the jet maker looked for local sources of tools and parts, he said, "Everybody told Eclipse, 'We'll do what we can.'"
As a result, most of the local suppliers stayed diversified and had a limited financial exposure to Eclipse when it filed bankruptcy. Although suppliers made a profit off Eclipse over the years, most lost money in the end. Unpaid invoices are just one reason. Most suppliers invested in nowidle machinery and material to make parts specifically for Eclipse.
