On Tuesday this week the US subsidiary of Parmalat filed for bankruptcy under chapter 11 of Bankruptcy protection in the Bankruptcy Court in Manhattan. The three dairy units Farmland Dairies, Parmalat USA and Milk products of Alabama have witnessed troubles since the parent company in Italy was found to have billions of Euros unaccounted for in a financial black hole.
The move by US managers proposed to help to stabilize the company by maintaining the value during the proposals to sell the sites. However, many of the farmers who supply milk to the businesses have opted to sell their milk to other co-operatives and competitors.
Milk suppliers began demanding cash upon delivery or repayment after they found that the parent company was in debt late last year, and this placed the company in a difficult situation to come up with the cash needed the court filing stated.
There has been a sharp decrease in the number of farmers that are willing to supply milk to the company. Since the crisis erupted in December last year 350 farmers in the US stopped supplying the company with milk as a result of late payments.
It is now definite that the US business will be sold and this will mean that it has followed in the footsteps of the UK and French businesses tat were sold earlier this month. It has been reported that the company has received letters from interested parties, that could buy the the businesses.
The company however claim that the filing should not directly affect other North American businesses. Management in the Canadian operation claims that it is business as usual.
Paramalt is Italy's eighth largest company and at the point where the black hole last year had operations across the world. The scandal has seen 19 employee arrested and one employee commit suicide. Industry observers predict that the Italian units will be the company's focal point in the future if it is to survive.
All events that have taken place in the backdrop of the Italian company's unraveled scandal have reconfirmed that the company's best chance of survival lies in securing its Italian interests.
However, it has been reported this week that Parmalat Mexico will gradually resume commercial operations and its bank accounts will be unfrozen.
The company said that it has been unable to pay its suppliers but has given no legal dispute or the negotiations. The unit filed for bankruptcy protection upon discovering the parent company's worries in December last year and on Tuesday this week is was decided that local operations are independently viable.
An Irish unit of the company was declared insolvent last week by an Italian court and this week the jurisdiction will move to Italy from Dublin at the request of Enrico Bondi, the Italian government-appointed commissioner of Parmalat.