Delphi, the largest U.S. auto supplier, files for bankruptcy
Saturday, October 8th 2005, 10:27 AM CDT
DETROIT (AP) _ Delphi Corp., the largest U.S. auto supplier, filed for bankruptcy Saturday, sending shock waves through the nation's auto industry, which already is weakened by high labor costs and falling market share.
The company's bankruptcy is one of the largest in the country's history.
Delphi filed to reorganize its U.S. operations in federal bankruptcy court in New York, where hearings are scheduled to begin next week. Delphi's non-U.S. operations were not included in the filing.
Delphi Chairman and CEO Robert S. Miller said the company hopes to emerge from Chapter 11 in early to mid-2007.
``We will make every effort to make this as quick as possible,'' Miller told The Associated Press on Saturday.
Miller, a restructuring expert who was hired in July, had threatened to take the company into bankruptcy if he failed to reach a restructuring agreement with Delphi's former parent, General Motors Corp., and its largest union, the United Auto Workers. Miller set a deadline of Oct. 17, when U.S. bankruptcy laws are scheduled to change.
Miller said Delphi will continue negotiating with GM and the UAW to lower its labor costs. Miller said the three parties agreed to continue their discussions after a bankruptcy filing.
``We mutually concluded there was still too much of the complex work yet to be done,'' Miller said. ``It was not going to be efficient to work right up to the midnight deadline to the change in the law.''
Miller said nothing will change immediately. Delphi will continue to pay its 50,000 U.S. employees and suppliers and will ship its products on schedule. Delphi has 31 plants in 13 states, including Michigan, Ohio, Alabama and California. The company has 185,000 employees worldwide.
``We are not going to adversely affect our customers,'' he said. ``Our people will get their pay checks and will still have their health benefits. Retirees will continue to get their checks. Any changes to that will be dealt with in an orderly way.''
Delphi will finance its operations with $4.5 billion in loans, including up to $2 billion in debtor-in-possession financing from a group of lenders led by JPMorgan Chase Bank and Citigroup Global Markets Inc.
Delphi, based in the Detroit suburb of Troy, has struggled to make a profit since GM spun it off in 1999. It lost $4.8 billion in 2004 and nearly $750 million in the first half of this year.
Delphi had $16.5 billion in total assets as of June 30, the most recent figure available, and has total debt of $6 billion, Standard & Poor's said Thursday. The company had $4.3 billion in unfunded pension liabilities at the end of 2004, according to a company filing with the U.S. Securities and Exchange Commission.
The largest corporate bankruptcy in the U.S. was WorldCom Inc., which had $103.9 billion in pre-bankruptcy assets.