Broken Promises in the Heartland: Adams Pressed Metals, John Deere, Galesburg, and China

This is a pretty interesting story, and it presents a cautionary tale for all those small towns in the midwest who see their biggest employer getting ready to pull up stakes or close for good.

As it happened, I got involved in this because of my representation of a small electroplating shop in Iowa. Here's how it happened.

Adams Pressed Metals Corporation was established in Galesburg, Illinois back in 1919 to provide stamped metal parts to the automotive and agricultural equipment trades. As it happened, John Deere in East Moline happened to be one of their best customers, and Deere orders rapidly became the backbone on which the company was built. As part of its business, Adams Pressed Metals would stamp metal parts and send them to a number of small shops in the Quad Cities region for electroplating, baking, and parkerizing before they'd be returned to Adams for shipment to the John Deere works and incorporation into the agricultural equipment that Deere was building.

Matters went from success to success and people around Galesburg grew up, worked for and retired from Adams Pressed Metals.

But that all changed with the new century, when Deere began sourcing the parts that Adams had formerly made to a shadowy company in China named Tristar Industries that was operated by one Doctor Johnny Liu. Adams couldn't make the parts for what Liu charged, and a plant closing seemed imminent. Deere, that penultimately American-as-apple-pie green tractor company did not, it seems think much of an Illinois vendor that had given them over eighty years of good service and fair pricing.

Adams was in deep trouble, and just when things seemed darkest, Doctor Johnny Liu rode to the rescue with a plan to acquire and save Adams with a large infusion of cash-to be matched, of course, with industrial development grants from the Illinois Department of Commerce and Economic Opportunity (DCEO) and and the Illinois Ventures for Community Action (IVCA).

And so it was, or so it seemed. Illinois Governor Blagojevich's office announced in June, 2003 that loan funding would be provided, and the company would stay in business in Galesburg. The truth of the matter was that at about the time the governor's motorcade disappeared up the road heading for Springfield, a line of trucks waited to remove all the machinery in the plant, for shipment to China.

Some Adams workers went with the machinery to teach the Chinese how to put them out of work. Adams became a Potemkin village with just enough connection to the heartland to give Deere a fig leaf of plausible deniability to hide their nakedness.

And that's where my client came in. He had acquired an older plating company that had had Adams as a core customer for many years. During the period of 2004-2005, he was doing subcontracting work for the new Adams Metals, and the bills weren't getting paid regularly. When he needed money and offered to settle the balance for something less, Adams stopped buying and stopped paying and stopped answering his phone calls-although they were still shipping work to other electroplaters and subcontractors in the area and bitching about the quality of the work he'd done which was never a problem when they weren't paying their bills.

The parts ultimately supplied to Deere, as it happens, were no longer made in Illinois but were being shipped there by Tristar from China.

Ultimately a lawsuit was filed, a settlement was reached at the last minute, the electroplater recovered most of his money I got paid, and we called it good.

And that's where matters stood until a couple weeks ago when I received a notice from a bankruptcy attorney that Adams Metals of Galesburg, Illinois had filed a bankruptcy petition on the 20th of June of this year.

The petition lists assets of zero and debts in excess of $1 million.

What's interesting about this is that according to the Galesburg Register-Mail, a two day auction was held in the beginning of March in which all the remaining assets of Adams were disposed of.

Reading further, it appears that all assets of Adams aside from a couple Chevy trucks were transferred to IVCA on October 17, 2006, about the time that one Dirk Pfeil garnished what was left of Adams' bank accounts in a collection lawsuit. There remains $7.45 in the Adams bank account.

What's also interesting is that two Chinese nationals appear as the president and director of Adams and neither of them is Dr. Johnny Liu who apparently got his name off the paper in October 2006.

As an attorney who sometimes works on the fringes of bankruptcies, that's a real eye opener, because it sounds like somebody cleaned out what was left of Adams and left a lot of people holding the bag.

The petition makes for interesting reading.Among the unsecured creditors are the IRS and a number of other creditors but the big loser at $373, 787 was IVCA, less whatever they recovered in the auction. That's real money, that was a real loan, and a real loss.

TSI International of Hong Kong appears as an unsecured creditor in the amount of $573,719 but that company's website tracks back to a shadowy real estate investment company in Toronto. I find the name TSI to be far more than mere coincidence, however.

Either TSI just fell off the turnip truck or TSI needed a big loss and what better way to do it than invest on paper in a failing company that was a mere shell of its former self?

I'm sure there's more to this story, but as I said in the beginning it is a cautionary tale for every small town in the midwest that sees one of its larger industrial operations failing.

Sometimes the cure can be worse than the disease.