Delphi Packard: So far, so good

By DON SHILLING
VINDICATOR BUSINESS EDITOR
No news is good news for Delphi Corp.'s local operations.
Delphi has filed a court document that shows how 21 of its plants are losing money in supply contracts with General Motors Corp.
By leaving its Warren-based operations off the list, Delphi reaffirmed that Delphi Packard Electric Systems is better off financially than most of its plants.
That also was indicated last Friday when Delphi announced it intended to sell or close most of its manufacturing sites by Jan. 1, 2008, cutting its hourly work force from 34,000 to 12,000. Packard's local operations are one of only eight manufacturing sites that Delphi intends to keep.
In the court document, which also was filed Friday, Delphi is asking a bankruptcy court judge to cancel nearly 5,500 supply contracts at 21 plants that are losing money and primarily supply GM.
Delphi expects the motion to be heard in court May 12.
Profitable sector
The sole mention of Packard in the filing was because it is part of Delphi's only profitable business sector -- Electrical, Electronics and Safety. Packard is one of three divisions in this sector, which had operating income of $133 million on revenues of $13.4 billion last year.
Two plants from this profitable sector are among the 21 plants that have losses with GM contracts, however. These plants, in Kokomo, Ind., and Milwaukee, are not part of Packard.
The 21 plants are expected to lose $2.1 billion on sales of $8.2 billion this year, the filing says. Last year, they lost $1.5 billion on sales of $9.3 billion.
A brake plant in Dayton, for example, is expected to lose $200 million this year on sales of $307 million. A spark plug plant in Flint, Mich., is expected to lose $254 million on sales of $321 million. A Detroit newspaper said, however, that GM is not buying spark plugs from that plant anymore because it switched to a Japanese supplier.
GM should cover a greater share of the cost for products made at these 21 plants because it left Delphi with noncompetitive products and high labor and retiree costs when it spun off Delphi in 1999, the filing says.
Retaining revenues
Delphi's business plan then called for retaining annual GM revenues of $22 billion, while sending some of its workers back to GM and replacing them with lower-cost employees. Neither part of the plan has occurred, and GM revenues fell to $13 billion last year.
Delphi said its profits from GM sales have taken an even larger fall as GM has put increasing pressure on Delphi to give annual price cuts on products.
In 1999, it was estimated that these cuts would average 1.6 percent of sales, but they actually have averaged 2.1 percent a year. Delphi's annual price cuts to GM have been 50 percent higher than those required by other automakers.
GM has temporarily suspended some price cuts this year but has refused "substantial relief," the motion says.
Delphi's U.S. operations lost $2.2 billion last year, which represented 19 percent of its $11.5 billion in domestic revenue.
shilling@vindy.com