An uncertain future faces many suppliers

Delphi bankruptcy filing could cripple smaller suppliers, an expert says.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
The Delphi Corp. bankruptcy filing has left its suppliers with unpaid bills and the prospect of less work in the future.
Suppliers with a large percentage of their business with Delphi face an uncertain future, said Scott Opincar, a business restructuring expert at McDonald Hopkins, a Cleveland-based law firm. "It could be crippling," he said.
Several area companies that supply Delphi didn't respond to requests for interviews.
Delphi relies on smaller suppliers to furnish it with parts and materials it needs to build vehicle interiors, brakes, steering systems and other components for automakers. Locally, Delphi Packard Electric Systems makes components for wiring harnesses that distribute power within a vehicle.
Pecking order
Suppliers have to try to absorb the losses from unpaid Delphi bills, Opincar said. When a company reorganizes in bankruptcy court, these claims are low in priority. Loan obligations and claims made after the bankruptcy filing are paid first.
The remaining money goes to suppliers with pre-bankruptcy claims. Opincar said these creditors generally receive less than 20 cents for every dollar they are owned, with payments sometimes amounting to just a few cents per dollar.
Even those payments appear to be a long time away. Delphi has said it expects to reorganize in 2007, so payments to creditors won't come until then.
Before the bankruptcy filing, some creditors softened the blow by having Delphi pay for deliveries immediately or within several days, Opincar said. Smaller suppliers, however, wouldn't have the clout to make those demands.
'Essential vendors'
Usually, Delphi paid suppliers on the second day of the second month after delivery, Opincar said. In other words, payment for shipments made in August would have been made Oct. 2.
Opincar said Delphi has asked for court permission to pay "essential vendors" $90 million if they agree to its usual payment schedule over the next two years. Delphi needs some of the suppliers because they are the company's only source for certain parts, he said.
Opincar added, however, that $90 million isn't much money for a company as large as Delphi, which had $28.6 billion in revenue last year.
"Everybody wants to know who is an 'essential vendor'," he said.
Meanwhile, suppliers are concerned about how they will be affected by the shrinking of Delphi operations, he said.
Delphi has said it intends to close or sell a significant number of plants. Suppliers of plants that are closed could lose substantial business.
shilling@vindy.com