Delphi Exiting Bankruptcy
After four years in Chapter 11 protection, GM’s largest supplier Delphi is returning to the land of the living. For now. Along the way, though, Delphi racked up some impressive bills. Automotive News [sub] estimates that GM has spent $12.5b on Delphi during its bankruptcy, and has pledged a further $1b in debt assumption, $2b in forgiven claims and $1.75b in investments in the new company. For these ( taxpayer funded) sacrifices, GM will get Delphi’s money-losing US operations and steering unit business. Delphi’s new owners Elliott Management and Silver Point Capital walked away from $3.5b in debt to assume control of the company, and $6.25b in pension obligations were dumped by Delphi and had to be assumed by the Pension Benefit Guarantee Corporation. Delphi’s bankruptcy alone cost $400 million in legal and professional fees. The new company’s manufacturing base has been migrated outside the US, and its main business will be in supplying electronics and air conditioning systems. Expected annual revenue is $10 billion compared to the $22.59 billion the firm earned in 2005, before entering bankruptcy. But rather than tut-tutting the waste, greed and ineptitude that has marked Delphi’s bankruptcy, let’s take this moment to remember the thousands of employees and retirees Delphi has cast aside in the name of rescuing the US auto industry. For, as the Sibyl of Delphi foretold in the 9th Century B.C.E., love of money and nothing else will ruin Sparta.
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@John Horner Thanks for the link, I didn't watch the video, but the accompanying article is an interesting read. Of course, a cynic might extend this line of thinking and come to the conclusion that the US government/treasury is yet another entity that's in the process of being stripped and flipped by monied interests. But hey, I'm not a cynic...are you?
The last time I saw Steve Miller, he was a lot more concerned about demanding two upgrades on a sold-out flight from Fort Myers to Detroit than he was about saving Delphi.
In response to ihatetrees the answer is NO the unions have not taken a haircut. The UAW - IUE/CWA unions have gone to the PBGC but GM topped up their retirements to full. I, on the otherhand, am a salaried Delphi retiree and I got the Fed-Ex letter last Feb. that my health care was being taken away. I went from paying $143 a month to $1495 a month in 30 days. That's a hit on the budget. Can't get insurance, heart condition. The union boys and girls today are complaining that they now have to pay $125 a month. At one time it was zero and then it went to $25. My pension is in the PBGC, I have to pay full for health care and we are totally ingnored by this administration that said retirees need to be treated better. Delphi is NOT an American company anymore and GM is only partly US made. The taxpayers gave them money and they closed plants. They moved some work overseas and also chose not to continue to buy some of their needs from US companies (tires). And yet, they believe they will find buyers here like the did in the past. Toyotas come from Georgetown, KY. and Honda's come from Ohio. Z4's come from Georgia. Need I say more.
Assuming their cost structure is "fixed", Delphi will start putting a lot of other suppliers out of business. Any supplier that competes against Delphi will need to seriously consider folding or doing a Ch. 11 to match them. It's a lose/lose for everyone.