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Operating more than 20 months under the protection of Chapter 11 bankruptcy, the company is closing down because of continuing financial problems stemming from lawsuits due to a product malfunction.
From 1982 to 89, Consolidated sold more than 800,000 attic-mounted horizontal furnaces. However, a problem with the heat exchanger in some units caused at least 40 fires in the installed homes.
There were no injuries from the fires, but there was considerable damage to the homes. That led to class-action lawsuits for millions of dollars being filed against the firm, which has an estimated net worth of between $6 million and $10 million, said Steve Ancel, an attorney for the company.
“There’s no way [Consolidated] could absorb those kinds of losses, or even cover the cost of defense against the suits,” he stated. “They filed for bankruptcy to stop the lawsuits and allow time to find solutions to the problem.”
He added that, “Chapter 11 has had an adverse effect on the business operations, continuing to reduce the amount of sales. It’s all catching up with us.”
Now, said Ancel, “The lender has declined to finance further. And without support, financing the company can’t continue.”
William Hall purchased the firm two years ago from a subsidiary of Welbilt Corp., Stamford, CT. He brought with him 30 years of hvac experience, but he was unable to overcome the company’s problems.
Consolidated is expected to close its doors by the end of March.