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Honda Scrambles to Sell Fuelmaker Amid Confusion and Outrage

April 10th 2009

Automotive - Honda GX

This continuing coverage of America’s oil crisis arises from the The Plan: How to Save America When the Oil Stops—or the Day Before (Dialog Press). Buy it here.

American Honda Company is scrambling to negotiate a sale of the Toronto-based Fuelmaker company amid widespread outrage and confusion among the supporters, suppliers, employees and customers of the compressed natural gas CNG refueling firm. News of the Honda-Fuelmaker debacle was broken exclusively by this reporter in The Cutting Edge News.

By way of background, Honda forced Fuelmaker into involuntary bankruptcy last week, stunning the CNG community which looked to the company for CNG home and office refueling through its Phill units and Vehicle Refueling Appliances. The clock is ticking on when some 14,000 Fuelmaker installations worldwide supporting a range of vehicles, from passenger cars to ice resurfacers, will require service or supplies.

Honda is said to be in the advance stages of finalizing a sale. While numerous buyers have lined up to acquire the shell assets and intellectual property of the firm—now that obligations to its suppliers and employees can be shed, two firms are said to be at the top of the list--a Chinese firm and an Italian company. Honda and others with knowledge of the negotiations would not comment on the two leading contenders, or their national origin.

Although, Honda and the Canadian receivers have declined to say much about the entire process, the following information has been pieced together by this reporter from numerous sources in Canada and the United States.

It all began when Honda forced Fuelmaker into involuntary bankruptcy by a chain of fast-moving events, beginning with a March 31, 2009 affidavit on behalf of a heretofore unknown, nameless numbered corporation. Honda would not divulge the identity of the numbered corporation. But this reporter has learned that its legal appellation is “2045951 Ontario, Inc.” This numbered corporation is reportedly controlled by Honda, according to key financial executives in the Honda-Fuelmaker combine. On March 31, 2009, this nameless, numbered corporation suddenly called its nearly $24 million note to Fuelmaker, and then appeared in a Canadian court to throw Fuelmaker into involuntary bankruptcy. This was done without notice to the company, according to executives in the Honda-Fuelmaker combine. Fuelmaker employees only learned of it indirectly through a third party aware of the proceedings. One declared, “We were totally blind-sided.”

A request by the nameless, numbered corporation to expedite the bankruptcy procedure against Fuelmaker was granted; and on Thursday, April 2, 2009, the well-known firm of Alvarez & Marsal was appointed interim receiver. The next day, April 03, Fuelmaker was adjudged bankrupt by a Canadian court. That same day, receiver Melanie MacKenzie abruptly appeared at the Fuelmaker headquarters with the documentation and court orders in hand, according to eyewitnesses. She then assumed control of the company, fired all employees on the spot without severance, ensured that they left the building, terminated all operations, and began the immediate liquidation of assets.

At the time of involuntary bankruptcy, Fuelmaker’s assets were listed at more than $6.75 million, of which nearly $3.8 million was inventory. The sum included at least $181,000 in prepayments and deposits. Canadian industry sources stated that at least one dealer was out $15,000. A Beverly Hills CNG advocate stated he recently sent in several thousand dollars for CNG equipment. An unhappy CNG supporter posted an online message: “Where do we get our money back from Honda? They cheated me!”

Of the scores of creditors, secured and unsecured, the largest by far was listed as the nameless, numbered corporation known as “2045951 Ontario, Inc.,” which is owed $23,891,241, presumably equal to the secured note that was called, this according to financial information gleaned from the Honda-Fuelmaker combine. American Honda Motor Company in Torrance California separately owns twenty percent of Fuelmaker, according to financial information also gleaned from Honda-Fuelmaker, and the Torrance company is owed an additional $599,183 in direct debt. Hence, Honda controlled Fuelmaker both through direct ownership and indirectly through its numbered corporation, Honda-Fuelmaker sources stated on condition of anonymity. Honda officials to respond to inquiries about the numbered corporation.

While Honda is the largest creditor, Gaz de France is owed more than $6.2 million and an Italian entity, IMI Italy, is owed more $835,000, according to corporate documents obtained by this reporter. The list of unpaid creditors and beleaguered employees is some 274 names long and includes sums as small as $63.50 to Norm Reeves Honda of Cerritos, California, records show.

Honda’s move stunned many in the CNG community who had long held out hope that the home and office refueling appliances of Fuelmaker paired with the Honda Civic GX and other vehicles could help proliferate CNG as an alt fuel for the United States.

Major sources in the CNG community expressed dismay that so little information had been made available to suppliers, dealers and customers.

One contributor to CNGchat.com, a leading CNG forum, declared, “Honda locked everything up on Thursday and told everyone they were done, 20 minutes notice to get your stuff out and we're changing the locks. …I don't think they fully thought out the repercussions of the move…My customers and I are holding our breath to see what happens along with our Honda dealers who just sold some GX's and we have paid Phills on order to go with them. Honda is going to come out looking bad. … The coming weeks will tell whether I'm still in business or doing something else.” He added that his family business was in danger of being “wrecked.”

Another blogger quipped, “That is low. People deserve to be treated better than that.“ The many negative remarks stood in stark contrast with a CNG community that has hailed Honda as a stalwart in the move to alt fuel, including CNG.

An American CNG dealer stated he knew many operators of ice resurfacing machines that would become inoperable in as soon as 11 days unless an immediate solution was found to their servicing needs. “If the problem is not fixed fast, perhaps they will switch to propane,” he opined.

Numerous parties are moving to finalize a sale. Honda-Fuelmaker and CNG industry sources stated that heading up the negotiations was Dan Bonawitz, a recently retired senior vice president who is being tapped to wrap up the Fuelmaker debacle. Bonawitz was personally involved with Honda’s alt fuel innovations before he retired.

Two leading contenders are on the “A List” of buyers, with a deal said to be imminent. Industry sources implied that the sudden bankruptcy, shedding liabilities, was an attempt to make the sale more attractive. An industry source quipped, “Their idea is to screw the suppliers and employees and then sell off what is left.” A Honda-Fuelmaker combine executive stated, “But I have been hearing it will be done today, and today, and today—every day.” He added, “But it never happens.” An executive stated, “They always screwed up the negotiations. Honda attorneys always ended up pissing people off.”

If negotiations with the “A List” fall through in the coming days, a “B List” is waiting in the wings. One eager CNG prospect stated he has investor and venture capital to back up his bid and has been repeatedly trying without success to negotiate the purchase of Fuelmaker since the ballyhooed deal with T. Boone Pickens’s firm, Clean Energy, fell through last fall. The Clean Energy effort reportedly fell through because Honda refused to release the financial information needed for due diligence by Clean Energy. Senior Clean Energy officials declined all comment for the record. The potential buyer said all his overtures had been spurned. He renewed his efforts after reading reports in The Cutting Edge News.
 
Critics say that Honda has been adding to the chaos and confusion by secrecy and lack of transparency. Five key Honda officials involved in the transaction refused to return calls or answer questions from this reporter on the transaction. A man identifying himself as a representing Alvarez & Marsal, the Fuelmaker receiver, and claiming to return a voice mail this reporter left for receiver Melanie MacKenzie, stated he would not even give his name. “Why should I give it to you? You’ll just publish it.” He then hung up. CNG industry sources and Honda partners on both sides of the border confirmed they can’t even get a copy of the bankruptcy, and stated that Honda refused to release any real details.

Numerous CNG supporters expressed the hope that the crisis would be resolved within days. “Otherwise,” said one enthusiast, “this will deal a severe blow to the entire CNG effort.”

Edwin Black is the New York Times best selling investigative author of IBM and the Holocaust, Internal Combustion and The Plan: How to Save America When the Oil Stops—or the Day Before (Dialog Press). More information about The Plan can be found at www.planforoilcrisis.com


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