Bankruptcy exit eludes Delphi
Some workers are on temporary layoffs at Warren, Ohio, area Delphi plants.
DETROIT (AP) — Delphi Corp. Executive Chairman Steve Miller says the auto parts maker’s turnaround plan is generating $20 billion to $30 billion per year in new business that will be an engine of growth for the company when it exits bankruptcy protection.
Leaving Chapter 11 will take more time, however. In the face of declining U.S. auto sales, tight capital markets have made investors wary about the Troy-based company, making it difficult to pull together the financing it needs.
On April 4, just as Delphi had arranged $6.1 billion in loans and additional funding from General Motors Corp. to get out of bankruptcy, an investment group led by the private equity firm Appaloosa Management LP pulled out of a deal to provide a $2.55 billion cash injection. Appaloosa accused Delphi of breaching an agreement with the investor group.
The move blew up Delphi’s exit financing, Miller told the Automotive Press Association in Detroit on Tuesday.
“Sooner or later the capital markets will get on line with what we need to do to exit from bankruptcy, and we will get it done,” he said during an appearance promoting a book about turning around Delphi and other companies. “It won’t get done in weeks, but it’s going to be months.”
Delphi, GM’s former parts arm that was spun off as a separate company in 1999, has been under bankruptcy protection since October 2005. In the past three years, it has lost nearly $10.9 billion as it downsized its U.S. footprint and became more of a global company.
Bankruptcy experts say Delphi’s 21‚Ñ2-year stay in Chapter 11 isn’t unusual, although at some point, liquidation could be possible if losses continue.
Much of the losses, Miller said, were one-time expenses from closing plants and exiting unprofitable business lines.
When Appaloosa backed out of the financing deal, it heightened worries for Delphi workers who thought Delphi would emerge from bankruptcy soon after unions granted lower wages and other concessions last year, said Michael O’Donnell, shop chairman for IUE-CWA Local 717. The local represents about 950 workers at three factories in and around Warren, Ohio.
At the Warren facilities, which make wiring cables, metal connectors and plastic molded parts mainly for GM vehicles, some workers are on temporary layoff. With GM sales down 10.9 percent so far this year and forecasts for sales to worsen, there’s little hope for them to be called back anytime soon.
“The membership is apprehensive,” O’Donnell said.
Delphi, once among the world’s largest auto parts suppliers, had about 30,000 hourly workers at 31 U.S. factories shortly after it filed for bankruptcy. Now it’s down to 14,800, including 2,400 waiting to retire, and it eventually will have only eight U.S. plants.
In Ohio, the company has about 3,500 hourly workers at plants in the Dayton area, Columbus, Warren and Sandusky. Delphi has said it plans to close or sell six of its 10 plants in Ohio.
Miller, though, said Tuesday that liquidation of North American operations wouldn’t be possible. Delphi studied separating its U.S. operations in 2005 and found problems with labor contracts and in determining which company would get intellectual property.