Saturday August 06, 2005

Delphi in restructuring talks

We already know that American car-makers are in trouble, now it appears that their car-part makers are also in trouble :

news.yahoo.com, reuters.com :

Delphi Corp was in talks with its former parent company, General Motors, and its main union in an attempt to restructure its U.S. operations and avoid bankruptcy, the auto parts maker said on Friday. Delphi's credit draw may be a message to GM and the United Auto Workers union that the company must cut its wages and benefit costs quickly to avoid Chapter 11 bankruptcy, analysts said. The credit draw down also caused rating agencies to cut their debt ratings on Delphi, which sent the company's bond prices down as much as 7 cents on the dollar.

Delphi, which reported a $403 million net loss in the first quarter, has struggled with high wage and benefit costs since GM spun it off in 1999. As part of the deal, Troy, Michigan-based Delphi inherited GM's contract with the UAW. GM uses billions of dollars of Delphi parts and could be liable for UAW pension and health care costs if Delphi filed for bankruptcy before the union contract ends in September 2007, analysts said.

In addition to operations issues, Delphi has been dogged by accounting improprieties that forced out six executives in recent months. In June, Delphi restated results from the past several years after completing its own investigation.

See also :

1. Resale Value of SUVs Tumbles
2. GM to cut 25000 jobs in U.S. by 2008

(2005-08-06 16:15:08 SGT) [Biz] Permalink

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