GM may bailout Delphi.
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GM may bailout Delphi.
Advertisement Delphi talks bailout with GM, UAW
Robert Sherefkin
Terry Kosdrosky
TRAVERSE CITY -- Delphi Corp. is in bailout talks with General Motors and the UAW.
Delphi President Rodney O'Neal confirmed the discussions, saying that the UAW and GM are cooperating with the parts supplier to fix "a situation that urgently must be dealt with."
"We do have to have the UAW and GM in cooperation with us to fix the situation," O'Neal said in an interview at the Management Briefing Seminars, "because we need a complete solution and we can only have that with our two strategic partners being involved."
The stakes are high in the three-way talks. Delphi of Troy, Mich., wants to avoid a Chapter 11 reorganization. GM wants to rescue its No. 1 parts maker because it has some liability for Delphi's considerable legacy costs. And the union needs to protect the 24,000 workers employed at Delphi's plants.
Delphi is suffering from declining volume from GM, a spike in raw materials, pension and health-care demands, and an accounting scandal.
Steve Miller, a former turnaround specialist named CEO of Delphi in June, has ruled out filing for bankruptcy protection unless cost-cutting with the UAW fails. A bailout is bound to be costly. But so is the cost of doing nothing.
Delphi sustained losses in three of its six years since being spun off from GM in 1999, including a $4.8 billion loss last year.
Delphi last year ranked No. 1 on the Automotive News list of Top 150 original equipment North American suppliers with sales of $17.60 billion.
The ultimate swing factor is the UAW. The union is prepared to offer help as long as it does not have to reopen the national labor agreement it has with GM until 2007. Says a UAW official, who asked not to be identified: "There is only so much the union can do. I don't think they're going to open that agreement back up. You never like to say never, but I don't see that happening at all. At the same time, though, there are some things you can do within the agreement."
Merrill-Lynch analyst John Casesa in a research note last month said that "it is increasingly clear to us that some kind of deal to save Delphi will be concluded sooner rather than later."
The three-way talks are aimed at finding relief outside GM and Delphi's restrictive labor agreements.
Most important, Delphi needs relief from the $27.50 an hour it pays its UAW employees. Having GM take back Delphi workers at a time when many of the automaker's own workers are nearing retirement would allow Delphi to hire a new work force at $12 per hour. That would mean cheaper parts from Delphi. It would also allow the UAW to help without reopening the labor agreement it has with GM until 2007.
In the event of a bankruptcy court filing, GM might have to take back Delphi workers with flowback rights, but the automaker might also have to absorb those pension liabilities as well. Under flowback, Delphi employees would be hired by GM.
Bearing the cost of flowback employees will be more manageable for a shorter timeframe on the way to a future contract that could allow more radical downsizing.
The crisis facing Delphi comes less than three months after the UAW agreed to a restructuring at Visteon Corp., the former Ford Motor Co. parts-making unit. Visteon, too, faced a bankruptcy court filing, analysts said, until Ford agreed to take back control of 17,400 UAW workers and 24 Visteon plants and locations.
O'Neal declined to say if a Delphi bailout will resemble the Visteon rescue. "It can come in all different forms and shapes. The key is that it gets fixed. How it comes about will take dialogue and creativity will dictate that. I'm not going to speculate on how the thing's going to look," O'Neal said.
Delphi is racing against time to dump unprofitable plants and business lines with its "fix, close or sell" efforts. The Automotive Holdings Group contains 11 plants employing 12,000 workers. Since 1999, it has closed or sold 78 plants or business lines.
Robert Sherefkin
Terry Kosdrosky
TRAVERSE CITY -- Delphi Corp. is in bailout talks with General Motors and the UAW.
Delphi President Rodney O'Neal confirmed the discussions, saying that the UAW and GM are cooperating with the parts supplier to fix "a situation that urgently must be dealt with."
"We do have to have the UAW and GM in cooperation with us to fix the situation," O'Neal said in an interview at the Management Briefing Seminars, "because we need a complete solution and we can only have that with our two strategic partners being involved."
The stakes are high in the three-way talks. Delphi of Troy, Mich., wants to avoid a Chapter 11 reorganization. GM wants to rescue its No. 1 parts maker because it has some liability for Delphi's considerable legacy costs. And the union needs to protect the 24,000 workers employed at Delphi's plants.
Delphi is suffering from declining volume from GM, a spike in raw materials, pension and health-care demands, and an accounting scandal.
Steve Miller, a former turnaround specialist named CEO of Delphi in June, has ruled out filing for bankruptcy protection unless cost-cutting with the UAW fails. A bailout is bound to be costly. But so is the cost of doing nothing.
Delphi sustained losses in three of its six years since being spun off from GM in 1999, including a $4.8 billion loss last year.
Delphi last year ranked No. 1 on the Automotive News list of Top 150 original equipment North American suppliers with sales of $17.60 billion.
The ultimate swing factor is the UAW. The union is prepared to offer help as long as it does not have to reopen the national labor agreement it has with GM until 2007. Says a UAW official, who asked not to be identified: "There is only so much the union can do. I don't think they're going to open that agreement back up. You never like to say never, but I don't see that happening at all. At the same time, though, there are some things you can do within the agreement."
Merrill-Lynch analyst John Casesa in a research note last month said that "it is increasingly clear to us that some kind of deal to save Delphi will be concluded sooner rather than later."
The three-way talks are aimed at finding relief outside GM and Delphi's restrictive labor agreements.
Most important, Delphi needs relief from the $27.50 an hour it pays its UAW employees. Having GM take back Delphi workers at a time when many of the automaker's own workers are nearing retirement would allow Delphi to hire a new work force at $12 per hour. That would mean cheaper parts from Delphi. It would also allow the UAW to help without reopening the labor agreement it has with GM until 2007.
In the event of a bankruptcy court filing, GM might have to take back Delphi workers with flowback rights, but the automaker might also have to absorb those pension liabilities as well. Under flowback, Delphi employees would be hired by GM.
Bearing the cost of flowback employees will be more manageable for a shorter timeframe on the way to a future contract that could allow more radical downsizing.
The crisis facing Delphi comes less than three months after the UAW agreed to a restructuring at Visteon Corp., the former Ford Motor Co. parts-making unit. Visteon, too, faced a bankruptcy court filing, analysts said, until Ford agreed to take back control of 17,400 UAW workers and 24 Visteon plants and locations.
O'Neal declined to say if a Delphi bailout will resemble the Visteon rescue. "It can come in all different forms and shapes. The key is that it gets fixed. How it comes about will take dialogue and creativity will dictate that. I'm not going to speculate on how the thing's going to look," O'Neal said.
Delphi is racing against time to dump unprofitable plants and business lines with its "fix, close or sell" efforts. The Automotive Holdings Group contains 11 plants employing 12,000 workers. Since 1999, it has closed or sold 78 plants or business lines.
Registered User
Joined: Jul 2004
Posts: 1,496
From: Roseville, MI, USA
Re: GM may bailout Delphi.
So, lets give 2 Billion to Fiat, lets bail out Delphi, but then turn around and force the Union to take cuts? 
Where exactly is the accountability in all of this? I don't understand.
Where exactly is the accountability in all of this? I don't understand.
Registered User
Joined: Sep 1998
Posts: 4,320
From: Memphis
Re: GM may bailout Delphi.
The Fiat thing was a huge mistake and everyone at GM can admit that. I'm sure heads rolled for that one. Bailing out Delphi is a no-brainer... if Delphi goes under so does GM's right hand supplier. This would be the worst of times for GM to start having to reorganize its supply chain because with that likely comes shortages, overages, and increased defects.
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Joined: Feb 2005
Posts: 146
Re: GM may bailout Delphi.
Originally Posted by Josh452
So, lets give 2 Billion to Fiat, lets bail out Delphi, but then turn around and force the Union to take cuts?
Where exactly is the accountability in all of this? I don't understand.
Where exactly is the accountability in all of this? I don't understand.
"In the event of a bankruptcy court filing, GM might have to take back Delphi workers with flowback rights, but the automaker might also have to absorb those pension liabilities as well. Under flowback, Delphi employees would be hired by GM. "
GM has contractual obligation resulting from the 1999 spin off of DPH to the UAW employees. Nothing in this business is ever black and white on the surface. That includes the Fiat deal.
Registered User
Joined: Dec 2000
Posts: 323
From: SK, Canada
Re: GM may bailout Delphi.
Man, it sounds like GM employees have it GOOD. Seriously, they have good pay, good benifits, and from what I read if Delphi were to go under they wouldn't lose their job because GM has an obligation to hire them.
Registered User
Joined: May 2001
Posts: 1,238
From: Wet Coast
Re: GM may bailout Delphi.
Originally Posted by JG/70Z
Man, it sounds like GM employees have it GOOD. Seriously, they have good pay, good benifits, and from what I read if Delphi were to go under they wouldn't lose their job because GM has an obligation to hire them.
Registered User
Joined: Sep 2003
Posts: 2,370
From: Germany
Re: GM may bailout Delphi.
but it doesnt really cost GM that much for work. the average car or truck is between 300-600$ of labor, thats nothing compared to the health care of about $1500 a car... and like the chrystler guy said that costs about the same as the steel to make the car... so lets put this all together...
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Joined: Nov 2001
Posts: 1,178
From: Payson, AZ USA
Re: GM may bailout Delphi.
Sorry Newbie, you are not allowed to let actual facts cloud your vision. 
I post on the Autoweek forums also. I have tried, on numerous occassions, to inform the Domestic haters that "assembling" a car in the US, does not a US car make. They don't get it. They seem to think that the assembly process is over half the cost of a vehicle or something. They just can't fathom how little the assemby process adds to the cost of a vehicle.
Thus, there is no way they can even remotely fathom how much the legacy costs impact the Domestics.............. in comparison.
I post on the Autoweek forums also. I have tried, on numerous occassions, to inform the Domestic haters that "assembling" a car in the US, does not a US car make. They don't get it. They seem to think that the assembly process is over half the cost of a vehicle or something. They just can't fathom how little the assemby process adds to the cost of a vehicle.
Thus, there is no way they can even remotely fathom how much the legacy costs impact the Domestics.............. in comparison.
Registered User
Joined: Oct 2004
Posts: 253
From: Kokomo, Indiana
Re: GM may bailout Delphi.
Damn, I really hope Gm bails out Dph. My dad worked at the Delco plant (DPH after 1999) in Kokomo for 33 years and just retired the end of July. All of his stocks are in Dph and have seriously went from $20+ to >$5 and are still falling. He was just talking about switching to a different company just yesterday because they are doing so poorly. Now that I've read this, maybe he can hold out on that and they will start gaining. Hopefully.
Btw, yea most Auw members make 27.50/hr. They start out lower and over time finally reach that amount. Then on saturdays and sundays they get double-time. And on Holiday's, they get Holiday Pay and if they work, they make triple-time.
Btw, yea most Auw members make 27.50/hr. They start out lower and over time finally reach that amount. Then on saturdays and sundays they get double-time. And on Holiday's, they get Holiday Pay and if they work, they make triple-time.
Registered User
Joined: Feb 1999
Posts: 2,947
From: Springfield,OH. U.S.A.
Re: GM may bailout Delphi.
OMFG DO THEY REALLY GET $27. 50 an HOUR!?!?!?!?!?
WTF
AND YOU DONT EVEN NEED A POST SECONDARY EDUCATION For THAT JOB!!
Man GM needs to slap the union around.
WTF
AND YOU DONT EVEN NEED A POST SECONDARY EDUCATION For THAT JOB!!
Man GM needs to slap the union around.
Benefits not even going there, they once were decent but now a JOKE...And, if you have'nt worked on an Auto Assembly line, please keep your opinions to yourself. They work hard, almost non-stop for the entire 8+ hrs...can't even take a leak, unless someone relieves them.
I don't work at GM, but am UAW in a truck Manufacturing facility...I know.
Do you think someone making $10/hour or less will give a crap about quality???
Anyways...some info from here, Dayton area..
Dayton Daily News
Delphi is the largest U.S. maker of auto parts employing nearly 8,000 Dayton area workers, said it started borrowing $1.5 Billion on Wednesday from its $1.8 Billion credit line. The Troy Michigan based company also confirmed it's in restructuring talks with GM, its former parent and largest customer, and the UAW, which represents around 2,200 local Delphi hourly workers and 25,000 nationwide. The restructuring will focus on controlling labor costs and the 13 operations the company considers unprofitable or uncompetetive.
Dayton has the highest concentration of troubled plants. Four of its five operations here have been placed in its Automotive Holdings Group, "Delphi's list of plants it might SELL or SHUT DOWN."
"Delphi still has a card to play", said Erick Merkle, a Delphi researcher with automotive forecasting firm IRN Inc. in Grand Rapids, Mich. "GM is heavily dependant on them. If Delphi is near bankruptcy, GM might pull them out of the fray". The reason, he said, is that GM would face a real issue with the assembly operations if Delphi closed. "Shutting them down is NOT an option", he said. "They have to keep them operating."
Delphi is the largest U.S. maker of auto parts employing nearly 8,000 Dayton area workers, said it started borrowing $1.5 Billion on Wednesday from its $1.8 Billion credit line. The Troy Michigan based company also confirmed it's in restructuring talks with GM, its former parent and largest customer, and the UAW, which represents around 2,200 local Delphi hourly workers and 25,000 nationwide. The restructuring will focus on controlling labor costs and the 13 operations the company considers unprofitable or uncompetetive.
Dayton has the highest concentration of troubled plants. Four of its five operations here have been placed in its Automotive Holdings Group, "Delphi's list of plants it might SELL or SHUT DOWN."
"Delphi still has a card to play", said Erick Merkle, a Delphi researcher with automotive forecasting firm IRN Inc. in Grand Rapids, Mich. "GM is heavily dependant on them. If Delphi is near bankruptcy, GM might pull them out of the fray". The reason, he said, is that GM would face a real issue with the assembly operations if Delphi closed. "Shutting them down is NOT an option", he said. "They have to keep them operating."
Basically:
Delphi will press UAW into early negociations of the 2007 contract deadline.
Stock rating were slashed into "JUNK" status...by 3 major agencies.
Delphi's $1.5 Billion draw from its credit line could mean its securing its liquidity should a banckruptcy filing become necessary.
S&P said Dephi has total debt of $4 Billion and total Unfunded pension and retirement liabilities of about $14.5 billion.
One of 2 things will happen...GM will bail them out, or Delphi will file chapter 11.
Last edited by 90rocz; Aug 6, 2005 at 11:16 PM.
Registered User
Joined: Nov 2004
Posts: 125
Re: GM may bailout Delphi.
Originally Posted by 90rocz
They have a "Teired" wage system, it takes years to reach that. Benefits not even going there, they once were decent but now a JOKE...
And, if you have'nt worked on an Auto Assembly line, please keep your opinions to yourself. They work hard, almost non-stop for the entire 8+ hrs...can't even take a leak, unless someone relieves them.
I don't work at GM, but am UAW in a truck Manufacturing facility...I know.
Do you think someone making $10/hour or less will give a crap about quality???
Benefits not even going there, they once were decent but now a JOKE...And, if you have'nt worked on an Auto Assembly line, please keep your opinions to yourself. They work hard, almost non-stop for the entire 8+ hrs...can't even take a leak, unless someone relieves them.
I don't work at GM, but am UAW in a truck Manufacturing facility...I know.
Do you think someone making $10/hour or less will give a crap about quality???
The 2 tier wage system applies only to new hires, but since there are too many workers now, how do you hire more?
Can't take a leak without a relief? Most jobs do not fall under that provision, but if it does, you will get someone to relieve you (pardon the pun). Plus, there is the two 23 minute breaks and half an hour lunch...
Do I think someone making $10 an hour will care about quality? They would if there job was on the line, but the current contract protects them. Also, I know many who make $27.50/hr who don't care about quality. And I'm in the business, so I know too.
Registered User
Joined: May 2004
Posts: 2,043
From: Shelbyville, IN
Re: GM may bailout Delphi.
I think Delphi should file Chapter 11, they might be able to sway more with the Unions on this. If GM bails them out the fight continues. I would rather Delphi file Chapter 11 and wake the Unions up then just waiting for GM to file Chapter 11...