[OPE-L] Delphi files for bankruptcy

From: Alejandro Valle Baeza (valle@SERVIDOR.UNAM.MX)
Date: Sun Oct 09 2005 - 22:22:53 EDT

Delphi files for bankruptcy
Auto parts giant files for Chapter 11 protection after seeking huge cuts
from UAW and help from GM.
October 8, 2005: 9:56 PM EDT

NEW YORK (CNN/Money) - Auto parts maker Delphi said Saturday it filed
for bankruptcy after warning for months that a filing was in the cards.

Delphi is the largest U.S. auto parts maker. The company filed for
Chapter 11 bankruptcy protection for itself and 38 U.S. units in the
U.S. Bankruptcy Court in New York. Delphi's non-U.S. units were not

It is the biggest bankruptcy filing in U.S. automotive history and
promises to have a broad impact across the industry.

The company's board also announced that it had appointed a new Chief
Financial Officer, Robert J. Dellinger. Dellinger was most recently CFO
of Sprint. He succeeds John D. Sheehan, who was named Delphi's vice
president and chief restructuring officer and had served as acting CFO
since March 4, 2005.

Sheehan will retain his responsibilities as chief accounting officer and
controller on an interim basis but his primary focus will be on leading
Delphi's restructuring activities, Delphi said in a separate announcement.

Delphi <http://money.cnn.com/quote/quote.html?shownav=true&symb=DPH(down $1.08 to $1.12, Research
<http://cnnfn.investor.reuters.com/Reports.aspx?ticker=DPH>) has been
warning of the threat of a bankruptcy filing for months. Its executives
have been seeking deals with both the UAW and former parent General
Motors Corp. in an effort to win what would essentially be a
multi-billion dollar bailout and stave off a bankruptcy filing.

The United Auto Workers local units said Thursday that Delphi is seeking
massive wage and benefit cuts according to published reports. A day
later Delphi Corp. said it sweetened severance policies for about 21 top
officers in a move that may keep executives loyal as the automotive
parts maker fights off bankruptcy.

"Having been unable to resolve our U.S. legacy issues out of court,"
said Robert S. Miller, Delphi's chairman and CEO. in a company
announcement, "we determined it was in Delphi's best interest to address
the U.S. cost-structure issues through the chapter 11 process now while
our liquidity position is strong."

Delphi's stock, which has fallen steadily from above $6 in August and
traded above $9 in the last 12 months, tumbled on the New York Stock
Exchange late this week to trade at an all-time low.

Almost 150,000 of its employees at the end of 2005 were union members,
with 25,000 in the United Autoworkers here in the United States.

Delphi had about 185,000 employees worldwide in 38 countries at the end
of last year, although it announced plans in December to cut
<http://money.cnn.com/2004/12/10/news/fortune500/delphi/index.htm> 8,500
of those jobs, including 3,000 at U.S. plants.

The company anticipates that the bankruptcy court would permit the
company to continue to pay wages, salaries and current benefits of U.S.
hourly and salaried employees and certain retiree benefits without
disruption and in the same manner as before the filing, the company said
in announcing the filing.

Delphi said plans to finance its global operations with $4.5 billion in
debt facilities plus additional financing in Asia, Europe and the
Americas, the company said.

The financing includes a commitment for up to $2 billion in senior
secured debtor-in-possession financing from a group of lenders led by
JPMorgan Chase Bank and Citigroup Global Markets, Inc., the company said

The former wholly-owned parts unit of General Motors Corp.
<http://money.cnn.com/quote/quote.html?shownav=true&symb=GMown $0.06
to $28.29, Research
<http://cnnfn.investor.reuters.com/Reports.aspx?ticker=GM>) said it has
been hit by the downturn in fortunes at the world's largest automaker,
as well as by its own internal problems.

An investigation into its accounting practices by the Securities and
Exchange Commission resulted in a broad turnover of top executives at
the company during the last year.

In addition to its ongoing troubles within the auto industry, the filing
may have been prompted by a change in U.S. bankruptcy law set to take
effect Oct. 17.

That change in the law is seen as giving companies less freedom to find
their way out of bankruptcy. It gives creditors and other parties in the
filing the chance to present a reorganization plan of their own after 18
months, including one that might include liquidation.

Under the current bankruptcy law, company management can essentially
have an unlimited time to present a court-approved reorganization plan.

The filing is bad news not only for Delphi and its shareholders, but
also for its former parent and largest customer General Motors, which
may face liabilities that it tried to shed when it spun off its parts
unit in 1999.

Delphi started as a division within General Motors supplying its
different brands with auto parts. Its unionized employees were
essentially covered under the same labor contracts as other UAW members
at GM, putting the unit at a cost disadvantage with some of its
competitors. It also had little ability to sell parts to other
automakers. Last year nearly half of the company's 2004 revenue of $28
billion was to automakers other than GM, up from only a bit more than a
third of its sales in 2002.

But the company lost $4.8 billion in 2004 and another $741 million in
the first half of this year. Analysts surveyed by earnings tracker First
Call had forecasted losses to continue into at least 2007.

After years of signaling its intention to spin-off Delphi, GM filed for
an initial public offering for the unit in November 1998. It went public
in February 1999, raising $1.7 billion for GM for the 18 percent stake
in the company that was included in the offering. Other shares of the
stock were distributed to GM shareholders later in the year.

Delphi said it plans to emerge from bankruptcy in early to mid-2007,
after substantially cutting U.S. manufacturing operations and modifying
labor agreements to reduce wages and benefits.  Top of page
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