GTAT: Arizona plant loses $1 million a day
Bankrupt company seeks to lay off 890 employees to cope with oppressive and burdensome’ Apple deal
GT Advanced Technologies has asked the bankruptcy court for permission to lay off 890 employees – including a relatively small but unspecified number at its facility in Merrimack – in an attempt to end an “oppressive and burdensome” deal with Apple to provide the technology giant with sapphire screens for its mobile devices.
The layoffs are part of the company’s request to wind down its operation in Mesa, Ariz., the company’s disastrous attempt to branch out into producing materials itself for the first time. Previously, GTAT had just sold equipment to other material producers.
GTAT said the plant is costing the company $1 million a day, and for that reason wants to break its nearly year-old $578 million contract with Apple.
“Only if GTAT winds down these operations will it be able to stop its mounting losses and refocus its resources on the operation of its core business of selling sapphire furnaces and other products,” said the company in one filing.
It also plans to shut down its sapphire manufacturing operations in Salem “with reductions in associated supporting personal at GTAT’s Merrimack, New Hampshire, offices.”
The filing is silent on workforce in its administrative headquarters in Nashua.
GTAT also is seeking to reserve the right to sue Apple because it may have numerous claims against it.
“This drastic step is necessitated by GTAT's liquidity crisis and the ongoing cash burn from its operations at these locations,” said the filing on the winding down of operations.
In the motions, filed Friday, GTAT said that it is withholding information for fear of a $50 million-per-occurrence penalty contained in its confidentiality agreement with Apple. But in a turnabout, the company said that such secrecy put other creditors and bondholders – owed about $600 million – at a severe disadvantage, and asked the court to order it to release the information.
The court agreed to hear the motions on Wednesday.
But PC Connection, another Merrimack-based firm, is owed $200,000, and it has asked the court to slow down, at least until creditors have a chance to form a committee to evaluate the proposals.
As of Monday, the court hasn’t even set a date for its first creditors’ meeting.
Meanwhile, GTAT share prices slipped to 39 cents, and the company is facing a delisting order on the Nasdaq exchange. Those shares were selling at $11.05 when the market opened on Monday, Oct. 6, shortly before the company’s bankruptcy filing.
It’s unclear how many people are currently employed at each GTAT location, though company attorneys told the bankruptcy court last week that it has 1,089 workers and that most of them are employed in Arizona.
Apple has not commented much on the filing, only to express surprise and to say it would try to preserve jobs at Mesa.
It is possible that Apple has a lien on the equipment. An Apple subsidiary owns the land, but agreed to prepay GTAT $578 million to equip and staff it to produce sapphire boule that can be sliced into screens for mobile devices. Nearly $440 million has been paid, leaving $139 million to go. Apple’s withholding of that final payment, some observers believe, might have driven GTAT into bankruptcy.
But the deal did not require Apple to buy any products. Speculation that the sapphire might be used in Apple’s iPhone 6 at one point pushed GTAT stock price over $20 a share, but it tumbled after Apple unveiled its new phone without sapphire, only including the material in the Apple Watch. Then it said the watch’s release would be delayed until February.