http://news.yahoo.com/s/ap/20051008/...phi_bankruptcy

DETROIT - Delphi Corp., the largest U.S. auto supplier, filed for bankruptcy Saturday, sending shock waves through the nation's auto industry, which already is weakened by high labor costs and falling market share.
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The company's bankruptcy is one of the largest in the country's history.

Delphi filed to reorganize its U.S. operations in federal bankruptcy court in New York, where hearings are scheduled to begin next week. Delphi's non-U.S. operations were not included in the filing.

Delphi Chairman and CEO Robert S. Miller said the company hopes to emerge from Chapter 11 in early to mid-2007.

"We will make every effort to make this as quick as possible," Miller told The Associated Press on Saturday.

Miller, a restructuring expert who was hired in July, had threatened to take the company into bankruptcy if he failed to reach a restructuring agreement with Delphi's former parent, General Motors Corp., and its largest union, the
United Auto Workers. Miller set a deadline of Oct. 17, when U.S. bankruptcy laws are scheduled to change.

Miller said Delphi will continue negotiating with GM and the UAW to lower its labor costs. Miller said the three parties agreed to continue their discussions after a bankruptcy filing.

"We mutually concluded there was still too much of the complex work yet to be done," Miller said. "It was not going to be efficient to work right up to the midnight deadline to the change in the law."

Miller said nothing will change immediately. Delphi will continue to pay its 50,000 U.S. employees and suppliers and will ship its products on schedule. Delphi has 31 plants in 13 states, including Michigan, Ohio, Alabama and California. The company has 185,000 employees worldwide.

"We are not going to adversely affect our customers," he said. "Our people will get their pay checks and will still have their health benefits. Retirees will continue to get their checks. Any changes to that will be dealt with in an orderly way."

Delphi will finance its operations with $4.5 billion in loans, including up to $2 billion in debtor-in-possession financing from a group of lenders led by JPMorgan Chase Bank and Citigroup Global Markets Inc.

Delphi, based in the Detroit suburb of Troy, has struggled to make a profit since GM spun it off in 1999. It lost $4.8 billion in 2004 and nearly $750 million in the first half of this year.

Delphi had $16.5 billion in total assets as of June 30, the most recent figure available, and has total debt of $6 billion, Standard & Poor's said Thursday. The company had $4.3 billion in unfunded pension liabilities at the end of 2004, according to a company filing with the U.S.
Securities and Exchange Commission.

The largest corporate bankruptcy in the U.S. was WorldCom Inc., which had $103.9 billion in pre-bankruptcy assets.

Like Tower Automotive Inc. and other auto suppliers who have recently declared bankruptcy, Delphi has struggled with the high cost of steel and other raw materials as well as U.S. production cuts.

But Delphi also blamed its spinoff agreement with GM for saddling it with high labor costs. Under the agreement, Delphi is required to pay GM wages of $27 an hour to most of its 24,000 UAW-represented workers. That's double the level of competing suppliers, according to Standard & Poor's Ratings Services. Delphi also had to pay full wages and benefits to 4,000 laid-off workers in jobs banks, which cost it $400 million each year.

Delphi has a total of 30,000 U.S. hourly employees and 12,000 hourly retirees. About 6,000 hourly employees are represented by other unions, including the International Union of Electronic Workers/Communications Workers of America.

Under a bankruptcy filing, Delphi could shift at least some of its pension liabilities to the federal government's Pension Benefit Guaranty Corp. and could get the court to order lower wages and benefits for the UAW and higher costs for its parts.

Under the spinoff agreement, GM also is liable for some of Delphi's pension obligations if Delphi is in bankruptcy. In a note to investors, Merrill Lynch analyst John Casesa said GM could be liable for $4.4 billion to $6.7 billion worth of pension and health care benefits.

Delphi and GM have been tightlipped about the negotiations. But a letter sent from UAW leaders to union members in Kokomo, Ind., earlier this week said Delphi asked the UAW to accept wage cuts of more than 50 percent, to $10-$12 an hour, and eliminate the jobs bank. Delphi also called for a reduction in health care benefits and vacation time.

Delphi also has been plagued by an accounting scandal that the
FBI and the SEC are now investigating. Six people have resigned because of the investigation, including Delphi's former Chief Financial Officer Alan Dawes.

 

From what I just read, this is a good thing and a long time coming.

Wages more than twice what competitors are paying?
Struggling to make a profit since 1999?
Possibly shifting some of their retirement costs to the government?

I don't really see why it wasn't done sooner, based on the story.

 

this is just company #1 that the UAW has forced into bankrupcy....mark my words there will be more, and sooner then later.

 

Once upon a time, the unions did a good thing for the workers. What they've mutated into now is absolutely stomach turning.

 

"Delphi also has been plagued by an accounting scandal that the
FBI and the SEC are now investigating. Six people have resigned because of the investigation, including Delphi's former Chief Financial Officer Alan Dawes."


Hello? Hasn't anybody read this part of the article or does everybody only want to read what they want to?

THIS is what led to the downfall of Delphi. NOT the union.

God, why isn't this fact THE major topic of discussion of why Delphi is in Chapter 11?

Why must all of you instantly blame the union? Can you all be so closeminded to believe there could only be ONE factor to this problem? And most of you claim to be educated?

I didn't know this board was made up of mostly republicans.

 

its always easier to blame unions instead of mngt. screwups.


god forbid they take any responsibility and the public lets them slide.

 

As I mentioned in another thread, I don't necessarily think the UAW workers "Deserve" to make what they make, but what we are witnessing is the erosion of high paying manufacturing jobs (and thus wealth) in this country. I find it strange that so many people are against the UAW. I'm not really a fan of unions, but I'd rather give a decent wage to some guy installing tires on a tahoe than further line the already fat pockets of the health care industry.

BTW, I worked in a UAW facility for a few years and most (but not all) of those guys work a lot harder than most other jobs that pay $12 an hour. Let me put it this way...my job's primary objective was to make sure the line workers had zero idle time during their 8 hour shifts. When was the last job that you had with no idle time? Food for thought...

 

It seems to me the most likely outcome is that GM will get saddled with even more UAW freeloaders as per the spin-off agreement. GM will be forced to take them all back now that they've used up all of Delphi's dowery. I just hope this isn't a trigger that causes a catastrophic chain of events in the US auto industry. I guess all GM can do is stay on course for 2007 until it can try to free itself from some of the UAW entaglements. But do they have enough resources to afford that?

 

maybe you missed this part?

see there is concrete evidence of abuse by the UAW as stated above. where in that article is the mention of ANY facts regarding the SEC investigation? none, just that there IS one. when the facts come out on that front, then we can look at them and say "this is really bad, maybe even worse than the UAW thing." if you can remember the public didn't exactly let Enron slide did it? but until then, you'd have to be brain-washed and/or closed minded to automatically skip over the FACTS and pass the blaim on to something vauge.

you are right, there is more than one thing at play here. but make no mistake, the UAW deserves a GOOD portion of the blame for this. no matter what else may be revealed. this is something you have a hard time understanding.

 

Scandel or not, if you are paying wages twice as much as the competitors, you will not be in business long. Just like what happened here.


GM will now be screwed with picking up the UAW tab. Sheesh.

 

Im pro union...

Im anti UAW.

Who would have thunk?

 

regarless weather its right or not an agreement was made to pay laid off workers.



so how is it abuse if it was agreed upon?

 

We're seeing combination of bad managment and high union costs. That is a bad equation. It all starts with accountability though and from an outsiders perspective, there appears to be little in the auto industry. How much did Zarella make for continuing to run GM into the ground? That may be the problem with upper managment in American companies in general (GM, Tyco, HP, NCR...)

Regardless, WERM is correct in saying that we may be seeing the continuation of the elimination of the middle class (that's a lot of prepositions in one sentence). It will be very interesting to see how this all plays out.

 

"Under the spinoff agreement, GM also is liable for some of Delphi's pension obligations if Delphi is in bankruptcy. In a note to investors, Merrill Lynch analyst John Casesa said GM could be liable for $4.4 billion to $6.7 billion worth of pension and health care benefits."

GM had better start selling more cars and trucks...

-B

 

Exactly, amazing how many people here seem to want everybody to make $8-$10 hour, while the CEO's, board members, and a few major stockholders get richer. I agree the job banks thing is a bad idea, but not much worse than giving all the board members 18 months severance pay.