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Sep 14th, 2007                                Print this article

Smaller, reorganized Delphi readies to emerge

By Tony Deligio

Nearly two years after filing for bankruptcy on Oct. 8, 2005, Delphi (Troy, MI) says it has reached a settlement resolving all outstanding issues between the reorganizing Tier One supplier and its former Big Three parent, General Motors (GM; Detroit). The companies brokered a pact that will allow the parts supplier to fully emerge from bankruptcy, following the reduction of 24,000 employees and the sale or closure of 25 North American sites. Among the conflicts broached are termination of certain supply agreements between the companies; rectification of post-separation claims from the 1999 spinoff; and so-called “legacy” issues surrounding pension and health guarantees made to unionized GM workers that came over to Delphi when it spun off. Should the plan adhere to its stated timetable, Delphi will obtain exit financing commitments at the start of the fourth quarter.

On the labor side, Delphi has reached agreements with the six unions that represent portions of its remaining workforce, in addition to reducing total staff by more than 24,000 via retirement buyouts or transition back to GM. In return for GM accepting some pension liabilities, Delphi has said it will freeze its hourly pension plan, transferring it to the automaker and offering some compensation. GM will also pay for hourly worker compensation for certain employees that exceeds $26.

Delphi’s automotive business now will focus on electrical/electronics; entertainment and communications; powertrain; safety; and thermal, with interests outside vehicles in consumer electronics and medical devices. There has also been a reduction in total sites through closure or sale, including the sale of the Dayton, OH brake-hose plant; Saltillo, Mexico brake-component business; and New Brunswick, NJ battery manufacturing. Delphi has also closed a Houston medical-device site and fuel injection units in Rochester, NY and Coopersville, MI. Discussions regarding its steering, bearings, interiors, and closures businesses are ongoing, with these units considered “non-core product lines”.

After seeing eventual Chrysler bidder Cerberus Capital Management LP drop out of its refinancing, Delphi has secured Appaloosa Management L.P.; Harbinger Capital Partners Master Fund I Ltd.; Merrill Lynch, Pierce, Fenner & Smith Inc.; UBS Securities LLC; Goldman Sachs & Co.; and Pardus Capital Management L.P. as investors, with those firms collectively inputting $2.55 billion in equity.—tdeligio@modplas.com

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