Major Spanish electrical appliance maker Fagor, which employs 5,700 people worldwide, moved closer to bankruptcy Wednesday after its parent company, Basque cooperative Mondragon, said it would not rescue the firm.
Fagor, the maker of appliances including washing machines and refrigerators, announced on October 16 that it had filed for protection from creditors while it tried to refinance its debt, estimated by the Spanish media at 800 million euros ($1.1 billion).
Under Spanish bankruptcy rules, the company, part of the sprawling Mondragon group created six decades ago in the northern Basque region, has four months to try to reach an agreement with its creditors.
But Mondragon said in a statement late on Wednesday that it felt Fagor, which has suffered a prolonged period of falling sales, "does not respond to the needs of the market and that the financial resources it is demanding would not guarantee its future".
Earlier on Wednesday Fagor, which says it is the fifth largest electrical appliance company in Europe, had warned that a lack of financing would push it to an "imminent bankrupcy demand".
Fagor posted sales of 1.17 billion euros in 2012, a drop of over one-third since 2007, a year before Spain's sharp economic downturn began due to the collapse of a decade-long property bubble.
The Mondragon group was founded in the 1950s by local priest Jose Maria Arizmendiarrieta as a small workers' cooperative and is now an international conglomerate with a mission of maintaining jobs.
Its various branches, present in 20 countries, include industry, distribution and finance.
Foreign sales reached nearly four billion euros in 2011, accounting for two thirds of the corporation's industrial division, which produces consumer electronics, car parts, machinery, sports gear and more.
Despite its international presence, Mondragon's cooperative structure has kept most of its jobs and production at home, with 35,000 employees in the Spanish Basque Country, 35,000 elsewhere in Spain and about 13,500 abroad.
Most of its workers are partners in the firm, voting to elect the bosses and make sensitive decisions.