Stiffing moldmakers for monies owed on molds is so common because it's generally known that this group of tradespeople have little legal recourse and shallow pockets when it comes to being able to collect. There are very few mold shops that haven't suffered severe losses caused by defaulting molders at one time or another.
Mark Krajniak closed his company, Hale Molds Inc. (Rochester Hills, MI), early last year after being unable to collect much of $1.6 million in receivables from various customers. "Tier One suppliers that we dealt with were taking six months to [sample and approve] a mold, continually missing dates, which kept delaying payment," Krajniak says. Others don't ever pay their toolmakers, he adds. "In reality, the moldmaker is the last to get paid."
So what can moldmakers do to prevent or at least react to this problem? At the moment, not much. But a new law recently passed in Michigan could be the first step toward the creation of a new, more even playing field for moldmakers across the country.
Leveling the Playing Field
On Feb. 28, a new mold lien statute was signed into law in Michigan that allows mold shops to attach a lien on a mold even if the moldbuilder is not in physical possession of the mold (see "Amended Mold Lien Law Passed in Michigan," April 2002 IMM, p. 12). This is a critical component of the new law, which was sponsored by the American Mold Builders Assn.'s three Michigan chapters and Public Affairs Assoc. Inc. in Lansing.
Although most states have a mold lien law created by the SPI, Michigan moldmakers discovered that possession of the mold was the key element in enforcing a lien and receiving payment. Consequently, these laws favor molders over moldmakers, allowing molders to retain the mold in cases of nonpayment of molded parts, but not allowing moldmakers any claim to the mold in cases of nonpayment of the tool or tool components.
Michigan's new mold lien law, however, specifically allows moldmakers to take possession of the mold. After giving written notification of nonpayment and the amount owed, if the moldmaker does not receive payment within 90 days, it then has the right to take possession of the mold, die, or form "without judicial process if this can be done without breach of the peace."
In Need of Protection
Allowing a company that hasn't been paid for a mold to repossess that mold is a major step for Michigan toolmakers looking for leverage. In fact, Michigan's mold lien law could offer a template to moldmakers and AMBA chapters in other states that want to launch a bill to gain more legal recourse in cases of nonpayment.
Such legislation would certainly help toolmakers such as Carson Tool & Mold (Asheboro, NC), Accuchrome Tool & Mold (Asheboro, NC), and Iowa Mold & Engineering Inc. (Belle Plaine, IA), all of which are currently in disputes over nonpayment with now-defunct Complex Tooling & Molding Inc.
Complex Tooling & Molding's North Carolina molding facility owes Carson Tool & Mold $113,000, and Accuchrome Tool & Mold $116,000. Although OEM Sanford Pen says it paid Complex for the molds, Complex reportedly did not pay either moldmaking company.
To complicate the situation, Complex then sold its Asheboro, NC plant to an investment company, Bridge East Capital LLC (Boston, MA), which renamed the facility Carolina Precision Plastics. Chris Crockett, vp of Bridge East, claims his company purchased the assets of the facility only, not the debts. However, he said in a telephone interview that Bridge East made "good faith payments to a couple of moldmakers we feel are important to our business, and since they're not going to get paid by Complex, we wanted to pay on that liability to develop the relationship."
The molds were sold as assets of Complex, despite the fact that they are the property of Sanford Pen, explains Accuchrome's Jim Sides, who recently filed suit against both Complex and Carolina Precision Plastics in Randolph County. Sides says Complex has not responded to the filing and Carolina Precision Plastics has made two offers to settle, "but not enough to satisfy me," says Sides.
Brad Cook of Iowa Mold & Engineering Inc. (Belle Plaine, IA) has had his problems with Complex as well. Cook built molds for Complex's Boulder, CO facility. Even after Cook had the molds sampled and received first article approval to validate the tooling, Complex refused to pay for the molds, saying the molds wouldn't run right. Cook hired an attorney and on Oct. 16, 2001, he got a default judgement against Complex for $159,000 and obtained writs of garnishment against the company's receivables.
Cook says he agreed to allow Bank One, the primary creditor of Complex, to proceed with an auction the week of March 11 if Bank One would agree to several stipulations, including one that says it won't challenge any garnishments. Money from the auction goes into a trust account. A final court ruling on March 19 decreed that Iowa Mold should be paid before other accounts receivable.
Some mold shop owners who deal with molding companies go around the molder to the OEM when experiencing payment problems. "We've done that in a few cases," says Cook, "and it seems to work when the customer puts pressure on the molder." Perhaps the pressure needed, however, is the kind that comes backed by legislation.
For complete text of the Michigan mold lien law or for more information, contact Jeanette Bradley, executive director, American Mold Builders Assn., (630) 980-7667, [email protected].
|How about repairs and tool changes?|
What about nonpayment for mold repairs and requested engineering changes performed by moldmakers? Companies like Kno-Mar Mold (Clearwater, FL), which says it's owed nearly $30,000 by large, publicly held custom molder Alltrista Corp., can also benefit from legislation like Michigan's mold lien law, which allows the moldmaker to repossess the mold until paid for these repairs or tooling changes.
Kno-Mar's invoice in question involves work done for Alltrista's subsidiary, Unimark Plastics (Greer, SC), on a three-plate stack mold that required a major engineering change. Kno-Mar sent a truck to pick up the tool at Unimark's plant in Greer. The ECO was quite extensive and reportedly required several moldmakers to work on the project throughout the weekend so that Unimark could get the mold back into the press on Monday.
At the time of pickup Kno-Mar says it questioned Unimark's molding engineer about a PO for the job. Kno-Mar was assured that the engineer's word was good and that the company would be paid for the work. "We had no reason at the time to doubt him," says a spokesman for Kno-Mar.
The bill for the work came to $48,000. Unimark paid $25,000, but has since refused to pay the remaining balance. When questioned about this Unimark's engineer reportedly told the moldmaker that the ECO should not have been necessary and should have been covered in the original design. Kno-Mar argues that it was an ECO and that it created a change in the function of the tool. Unimark has since directed Kno-Mar to contact Alltrista's legal department concerning any nonpayment complaints in this specific case.
Kno-Mar says Unimark also owes the company $5500 on another mold in which it was asked to move the gate. After the gate was moved, Kno-Mar claims that Unimark said the moldmaker should have known the gate belonged there in the first place, and refused to pay the bill.
In response, Kno-Mar showed Unimark the original print for the tool on which Unimark's engineer signed off on the gate location. Still, Unimark continues to refuse payment. Bruce E. Whelchel, division controller for Unimark, gave this comment: "In instances where there is clear nonperformance we withhold payment."