Delphi Maneuvers To Finally Leave Bankruptcy Behind

Delphi Maneuvers To Finally Leave Bankruptcy Behind

By Bill Visnic

Following nearly four years of wallowing in Chapter 11 bankruptcy protection, automotive super-supplier Delphi Corp. now has a substantive plan to emerge - curiously enough, just as its "inventor" and largest and closest customer, General Motors Corp., begins its own bankruptcy proceedings.

Delphi says it will sell most of its assets to private-equity firm Platinum Equity LLC, with a GM "affiliate" purchasing some of Delphi's parts-making operations, according to a report in the Wall Street Journal.

A GM executive said in a conference call with reporters this morning that GM will provide about $250 million in bridge financing with the goal of Delphi emerging from Chapter 11 by the end of July.

Parnassas Holdings LLC, an affiliate of Platinum Equity, reportedly will commit about $3.6 billion to own and operate the Delphi facilities it plans to control. Those operations will not have legacy costs for its labor force that GM will assume as it takes over several "key" Delphi plants run by a United Auto Workers union labor. The number of hourly retirees for which GM will have pension responsibility is said to number about 45,000.

As part of the newly configured restructuring, Delphi is shutting down its pension program for salaried workers; the federal government's Pension Benefit Guaranty Corp. will assume responsibility for that obligation.

Part of the Delphi empire GM will assume is Delphi's steering-systems business, a foundation operation which had been the focus of several recent negotiations.

GM's proposed acquisition of a substantial portion of Delphi's components-making operations creates an ironic juxtaposition of the two companies' evolution. Delphi was formally created by GM in 1999 as part of an ongoing strategy to spin off many of its closely-held partsmaking operations, a trend in vogue in Detroit at the time as GM and Ford Motor Co., in particular, sought to rid their balance sheets of the often money-losing operations and their costly UAW labor.

But the outsourcing solution that created Delphi and primary rival Visteon Corp. - comprised mainly of Ford's partsmaking operations - was troubled almost from the start and was patently unable to withstand the nation's economic turmoil that subsequently caused the auto sector's current distress. Visteon filed for Chapter 11 bankruptcy protection on May 29.

Now GM and likely Ford appear to have little choice but to reabsorb at least parts of Delphi and Visteon in order to guarantee the supply of parts and components critical to maintain auto production.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.