NILES — A Southwest Michigan retailer and machine shop specializing in refurbished diesel engines has filed for Chapter 11 bankruptcy less than two years after incorporating, citing mounting warranty claims and broader supply chain disruptions.
Atlas Heavy Engine Co., a Niles-based company doing business as Worldwide Diesel, on March 14 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Western District of Michigan under Subchapter V of the U.S. Bankruptcy Code.
Owned by Richard Campbell, Atlas operates from a 45,000-square-foot warehouse at 1515 N. Old U.S. Highway 31 in Niles. The company has nine full-time employees, including Campbell and his wife, according to an affidavit Campbell filed.
In court filings, Atlas reported $1.1 million in assets and more than $4.2 million in total liabilities, including more than $4.1 million in secured claims.
According to an affidavit, Campbell purchased the assets of Quality Truck Parts Inc. (QTP), formerly doing business as Worldwide Diesel, for $3.8 million in October 2021. Atlas Heavy Engine Co. was incorporated solely for the purpose of purchasing QTP’s assets.
The purchase price, closing costs and startup capital for Atlas were financed through a loan from Huntington Bank, as well as seller financing from Quality Truck Parts and a cash infusion of $210,000 from the Campbells.
The company’s financial hardships began six months after closing the deal, when Atlas began receiving numerous warranty claims that totaled approximately $95,000, according to Campbell’s affidavit. Fulfilling these claims sapped Atlas’ working capital, according to the affidavit.
At the same time, industry-wide supply chain shortages led to the company’s inability to replenish inventory at the prices and margins that aligned with the cost of QTP’s assets, court filings claim.
To combat these challenges, Campbell said he laid off approximately 25 percent of staff, increased services and purchased Missouri-based 2nd Chance Diesel in an effort to vertically integrate inventory production. Campbell and his wife also waived their salaries from July 8, 2022, to Feb. 21, 2023, according to court filings.
However, these decisions were “insufficient remedies,” as Atlas did not generate sufficient revenue and defaulted on its loan payments to Huntington, according to the affidavit.
Meanwhile, Huntington also filed a civil suit against Atlas Heavy Engine Co. in Berrien County Circuit Court. The chapter 11 filings show that case is still pending.
The court filings show Atlas’ gross revenue decreased from nearly $2.3 million between July 1, 2021, and June 30, 2022, to less than $1.4 million from July 1, 2022, to the March 14, 2023 filing date.
The unsecured creditors include Huntington Bank Commercial Loan Servicing ($3.39 million total), Quality Truck Parts ($422,572), American Express ($462,084), Henry & Sons Equipment Repair in Indiana ($14,369) and Brunetti Express in Florida ($10,033).
Campbell said in the affidavit that Atlas will restructure its liabilities through its Chapter 11 process, allowing the company to operate at margins sufficient to replenish its cash collateral.
Steven Bylenga, partner and co-founder of Grand Rapids-based CBH Attorneys & Counselors PLLC, is representing Atlas in the Subchapter V process, which was created to help small businesses save time and costs compared to a typical Chapter 11 filing.
Campbell could not be reached for comment.