- The Washington Times - Sunday, October 9, 2005

DETROIT (AP) — Delphi Corp., the nation’s largest auto supplier, filed for bankruptcy protection yesterday, sending shock waves through a U.S. auto industry already weakened by high labor costs and falling market share.

Delphi’s bankruptcy filing, which is expected to result in plant closures and layoffs, is one of the largest in U.S. history. The company has 50,000 U.S. employees.

The company filed to reorganize its U.S. operations in federal bankruptcy court in New York, where a judge yesterday allowed Delphi to continue operating and set more comprehensive hearings for Tuesday. Delphi’s operations outside the United States 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,” Mr. Miller told the Associated Press yesterday.

Mr. Miller, a restructuring specialist 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 (UAW).

UAW officials criticized Delphi’s decision to file for bankruptcy protection only one day after sweetening the severance packages of 21 top executives to help persuade them to stay with the company.

“Once again, we see the disgusting spectacle of the people at the top taking care of themselves at the same time they are demanding extraordinary sacrifices from their hourly workers, engineers, administrative and support staff, midlevel managers and others,” union leaders said in a statement.

Mr. Miller said nothing will change immediately. Delphi will continue to pay its U.S. employees and suppliers and will ship its products on schedule. The company has 31 plants in 13 states.

“We are not going to adversely affect our customers,” Mr. Miller said. “Our people will get their paychecks 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.”

Based in the Detroit suburb of Troy, Delphi 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.

The largest corporate bankruptcy in the United States was WorldCom Inc., which had $103.9 billion in pre-bankruptcy assets.

Like Tower Automotive Inc. and other auto suppliers that recently have declared bankruptcy, Delphi has struggled with the high cost of steel and other raw materials, as well as U.S. production cuts.

But Delphi also blamed its spinoff agreement with GM for saddling it with high labor costs. Under the agreement, Delphi is required to pay GM wages of $27 an hour to most of its 24,000 UAW-represented workers — double the level of competing suppliers, according to Standard & Poor’s Ratings Services. Delphi also had to pay full wages and benefits to 4,000 laid-off workers in jobs banks, which cost it $400 million each year.

Delphi and GM have been tight-lipped about the negotiations, but a letter sent from UAW leaders to union members in Kokomo, Ind., last week said Delphi asked the UAW to accept wage cuts of more than 50 percent, to $10 to $12 an hour, and eliminate the jobs banks. Delphi also called for a reduction in health care benefits and vacation time.



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