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Image from local resident's video shows part of the Mesa, Ariz., plant whose furnaces must be sold to pay back creditors.

After a bankruptcy judge in December approved a settlement with primary creditor Apple Inc., GT Advanced Technologies has started dismantling a Mesa, Ariz., factory that was once touted as a symbol of Apple’s commitment to bring manufacturing jobs back to America. 

The means of funding the settlement are unusual and have created skepticism. GTAT will give Apple $439 million through the sale of more than 2,000 furnaces it intended to use to make sapphire glass in Mesa. While the court has approved the settlement between Apple and GTAT, the case is far from over for contractors and engineering firms that are still owed millions of dollars for their work on what was known as “Project Cascade.”

Dean Wine, vice president of the Arizona Building Trades Council, says GTAT, the maker of  other advanced materials, once looked solid. With Apple Inc. backing its project and negotiating construction contracts on the renovation and refitting project, the contractors began work on the $500-million overhaul last year.

Nevertheless, many companies have been left unpaid and are now fighting as creditors in the New Hampshire bankruptcy case, said to be one of the largest in the state’s history. GTAT is based in Merrimack, N.H.

The claims in bankruptcy court are long. CH2M Hill, one of the companies that worked on the project, filed a claim for $1.3 million on Dec. 30. Massachusetts' Green Leaf Construction says it is owed $544,000. Rosendin Electric has a claim of $177,000, and McCarthy Building Co. says its claim is between $100,000 and $200,000.

Numerous specialized material, equipment and control-engineering suppliers and subs have filed claims, too.

Following its settlement deal with Apple, GTAT asked the bankruptcy court to settle other claims through the sale of furnaces, as well, but creditors are skeptical. "The Debtors ability to realize $500,000 to $900,000 in sale proceeds for each of the 2,036 Mesa furnaces is pure speculation that's undermined by the fact that the Debtors have yet to sell a single Mesa furnace, post-petition," stated a recent creditors filing in the case.

Originally built for another advanced-material company, First Solar, to make photovoltaic-panel film, that company had to sell the plant when Chinese oversupply knocked the bottom out of its market. That’s when Apple stepped in. First Solar lost $60 million on the sale.

Low-Cost Solution

Buying the facility for only a percentage of what it was  built for—and with a package of tax incentives from Arizona officials—Apple thought it had a low-cost solution to produce massive amounts of the sapphire glass it planned to use to make future iPhones.  

But things began to go wrong rather quickly. The first phase of the Mesa facility was not operational until December 2013, only six months before GTAT was expected to be operating at full capacity. Additional unplanned delays associated with retrofitting the Mesa facility, including the “reconstruction” of concrete floors the size of two football fields, also surfaced, said GTAT Chief Operating Officer Daniel Squiller.

In an August conference call, GTAT Chief Executive Officer Tom Gutierrez claimed a large amount of inventory was spoiled because of construction efforts taking place at the site. “It was unique in that parts of the construction had to be isolated and sequenced because there were manufacturing activities also occurring,” Wine says.

In an affidavit filed in the bankruptcy, Squiller said Apple selected the Mesa facility and negotiated all power and third-party construction contracts for the design and build-out of the facility. Apple tried for weeks to have the case's testimony, including Squiller’s affidavit, sealed. By leasing the facility to GTAT and keeping design and construction contracts in the supplier’s name, Apple was able to unfairly unload its risk, Squiller claimed.

Bankruptcy Court Judge Henry J. Boroff said the case was essentially a construction confict that involved the owner, a contractor and the changing of specifications. But there is little else in the record to clarify what occurred and what went wrong.

Neither Apple nor GTAT responded to ENR’s request for comment.

From the beginning, the job was characterized by secrecy and haste, with contractors bound by strict confidentiality agreements for their work on Project Cascade.

“We found out who the owner was from the newspapers,” Wine says. “It was hectic and fast-paced, but, for a job that big, I know our members would tell you there were very few issues with what we had to do.