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Delphi Back on the S&P List

Back in good graces after decade of turmoil.

by on Dec.24, 2012

Seven years after a bankruptcy filing launched what became a sweeping reorganization – and the longest corporate run through the Chapter 11 process in American business history — Delphi Automotive is final returning to the good graces of Wall Street.

The auto parts manufacturer Delphi Automotive (US:dlph) will replace Titanium Metals Corp. in the S&P 500 index, S&P Dow Jones Indices said in a statement Tuesday evening.

The change will take place after the close of trading on Dec. 21, when Precision Castparts Corp. is expected to complete its acquisition of Titanium Metals.

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Delphi, which assumed control of a substantial portion of General Motors’ in-house parts empire in 1999, filed for bankruptcy in 2008 as its struggled with an unwieldy cost structure built around traditional union contracts that had been undercut and rendered unsustainable by the rapid globalization of the auto industry.

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Former Car Czar Will Testify About Abandoned Delphi Pensions

About 70,000 Delphi employees lost retirement plans under bankruptcy.

by on Jun.21, 2011

Former auto czar Ron Bloom will be facing some tough questioning on the GM bailout and Delphi bankruptcy.

Former White House “Car Czar” Ron Bloom will be one of those called to testify in what could be an angry Congressional session looking into the long-term impact of the General Motors bailout.

Among other things, lawmakers are expected to focus on the decision to abandon the pension program run by Delphi, GM’s former parts subsidiary.  Delphi, which underwent the longest corporate bankruptcy in U.S. history, walked away from a program that covered about 70,000 retirees.  Some have lost as much as 65% of their benefits.

Among others called to testify will be Vince Snowbarger, the deputy director of the Pension Benefit Guaranty Corp., the agency created to assume control of failed pension programs.  Delphi’s pension program was underfunded by $7 billion, and the PBGC will cover $6.1 billion of that – making it the second-largest failed pension program ever assumed by the agency.

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While Delphi did not receive a direct federal bailout, its survival – and eventual emergence from Chapter 11 – depended on its ongoing relationship with GM.  That was enough to bring it under the umbrella of the House Oversight and Government Reform Committee, which will be holding a Wednesday hearing titled, “Lasting Implications of the General Motors Bailout.”

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Delphi Files for IPO

Once-bankrupt supplier hoping to raise millions, possibly billions, through stock offering.

by on May.31, 2011

Delphi CEO Rodney O'Neal prepares to take the supplier public again.

Delphi Corp., which endured the longest corporate bankruptcy in U.S. history, has filed with the Securities Exchange Commission asking for permission to sell shares through an initial public offering that plays up the company’s potential for growth in China and other overseas markets.

Delphi filed for bankruptcy in 2005 in a bid to scrap what it described as an unsustainable business model that included a heavy reliance on its former parent, General Motors, and a large manufacturing base in the United States. The bankruptcy wiped up Delphi’s old shareholders and left the company’s salaried pension fund in the hands of the Pension Benefit Guarantee Corp.

The Troy-based automotive supplier spent four years under Chapter 11 protection before emerging from bankruptcy in October 2009 with a much smaller manufacturing presence in the U.S. and a focus on supplying high-tech componentry, including safety equipment, fuel-management and electronics.

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The new Delphi is now counting on growth in the automotive market in the next few years to impress would be investors.

Global vehicle production is forecast to grow at a compound annual growth rate of 6.8% from 2010 to 2015. In the near-term, the mature markets, including North America and Western Europe, are expected to grow at 3.3%, from 2010 to 2015, for an increase of approximately 6.9 million units, while the emerging markets are forecast to grow at 10.3%, during the same period, for an increase of approximately 22.2 million units.

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Delphi Opens Up With New Infotainment System

Open architecture strategy lifts limits on upgrades.

by on Sep.10, 2010

Delphi makes a big score with the new Audi A1.

Auto industry officials often talk about adopting Silicon Valley’s rapid pace of innovation, and nowhere is that more critical than in the growing world of onboard electronics.

Consumer electronics companies measure product lifecycles in months, not years, and open architecture software is a key reason this is possible.  Traditionally, automakers have stuck with proprietary technologies which may have to be completely rewritten or redesigned from one model to the next.

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But Delphi Corp., the big supplier that has largely shifted from old-style parts to high-tech electronics, is racking up a big score as it begins to supply a new open-source infotainment system to Audi for the German maker’s new luxury minicar, the A1.

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Reinventing the SAE World Congress

by on Apr.27, 2010

The annual gathering of auto engineers, the SAE World Congress, has been shrinking for years. But the 2010 event was intentionally downsized, claim its organizers.

If the SAE World Congress looked smaller to those attending the industry’s premier automotive engineering event at Detroit ‘s Cobo Center earlier this month, that’s because it was smaller – by design, according to conference organizers, though recent history shows the once massive event has been shriveling on its own for a number of years.

Some 300 companies exhibited at the event last year but the 2010 World Congress saw just 103 firms on the floor, according to Andrew Brown Jr., chief technologist at Delphi Corporation and president of the SAE for 2010. The number of papers presented at the conference was smaller, as well – about 1,090 versus 1,370 in 2009 – and attendance was down from 16,000 to somewhere beyond 10,000.

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“The food court was nearly as big as the displays,” complained one participant, asking not to be named, but echoing a comment heard repeatedly during this year’s show.

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Delphi Finally Close to Emerging from Bankruptcy

Private equity firm provides the critical mass and capital.

by on Jun.01, 2009

Tom Gores of PlatinumEquity

"We know the business very well and understand its potential."

After spending nearly four years mired in bankruptcy court, Delphi Corporation may finally emerge from behind Chapter 11 protection as an asset of a Los Angeles-based private equity firm rather than under its own control.

Delphi, via a transaction with Parnassus Holdings II, LLC, an affiliate of Platinum Equity, and with the support of GM Components Holdings LLC, an affiliate of General Motors Corporation, has put together a new emergence plan that could stave off liquidation if it works. The President’s Auto Task Force worked behind the scenes to organize the deal.

Platinum is not new to Delphi. Platinum had bid successfully for Delphi’s Steering Gear plant last year but withdrew its bid last winter after the credit crisis made it difficult to obtain financing, but had indicated it was prepared to make another bid when the conditions were right.

This time, however, instead of taking the steering gear business, Platinum will take on all of Delphi’s remaining business.

The most significant development is Platinum will now get control of Delphi’s overseas business, which had not been part of the U.S. Bankruptcy Court proceedings. Parnassus will operate Delphi’s U.S. and non-U.S. businesses going forward with emergence capital and capital commitments of approximately $3.6 billion and without the labor-related legacy costs associated with the North American sites. They are being acquired by GM Components Holding LLC together with Delphi’s global Steering business.

Delphi will continue the wind-down and disposition of several discontinued operations, primarily located in the United States, through a reorganized entity expected to be called DPH Holdings Co. The sites include: Athens, Ala.; Fitzgerald, Ga.; New Castle, Ind.; Olathe, Kan.; select sites in Flint and Saginaw, Mich.; Clinton, Miss.; select sites in Columbus, Cortland, Dayton, Kettering and Warren, Ohio; a leased facility in Columbia, Tenn.; and Oak Creek Wisc.

Delphi Steering was spun off in 1999 as part of GM’s ill-fated spin off of Delphi. It has a 100-year history of innovation as well as comprehensive in-house design and development capabilities.    (more…)

Visteon Goes Bust

This time, it couldn’t escape a Chapter 11 filing.

by on May.28, 2009

Ford's former partsmaking operations, Visteon Corp., had repeatedly dodged the hangman's noose, but it's finally facing Chapter 11 reorganization.

Ford's former partsmaking operations, Visteon Corp., had repeatedly dodged the hangman's noose, but it's finally facing Chapter 11 reorganization.

After a series of narrow, 11th hour escapes, the clock finally struck for long-troubled auto supplier Visteon Corp., this morning, the company announcing it is filing for Chapter 11 bankruptcy protection.

The one-time Ford partsmaking operation has been in trouble almost since its birth, in late 2000, and has depended on a series of handouts and concessions from its former parent to avoid a financial collapse up until this point.  Indeed, it was only through meeting a last-minute deadline to cover interest on its vast debt, barely a month ago, that Visteon was able to remain solvent.

But the company says that the current, deep automotive sales slump, compounded by planned summer production shutdowns, simply made it impossible to keep going without a court-protected reorganization.

Subscribe to TheDetroitBureau.com“During the reorganization period, we will seek to address our capital structure and legacy costs that are not sustainable given the current economic environment,” said Visteon Chairman and CEO Donald J. Stebbins, in a prepared statement. (more…)

Chrysler Picks Future Suppliers

Bankruptcy Court Filing lists some winners and losers.

by on May.15, 2009

Scott Garberding, Chrysler LLC

Chrysler will continue to work with those suppliers who wish to become part of the new enterprise.

Chrysler LLC today announced this morning that it would begin the process of assigning the “overwhelming majority” of the company’s supplier contracts to the new company established in with Fiat SpA once an asset sale is completed as it emerges from bankruptcy. Some of the winners are Alcoa, Continental, Delphi, Johnson Controls, Magna International and Penske Corporation.

Chrysler has also started a process by which suppliers may be paid pre-bankruptcy accounts receivable. Chrysler claims that the amount it is willing to pay is higher than those normally assigned during a bankruptcy process, a contentious assertion no doubt with some suppliers.

About 40% of what is owed is offered immediately, with the balance to be assumed by the new company and paid back over time. Whether its ailing suppliers can last that long is an open question. Roughly 20% of Chrysler suppliers were in the “high risk” or “risk” categories Chrysler uses to assess their financial health, and that was before all of its plants were shut down last month. Typically it takes Chrysler 45 days to pay a supplier after it has received the parts.

The bankruptcy continues to have potential dire consequences for Ford Motor and General Motors since 96 of Chrysler’stop 100 suppliers also supply both of those loss-making companies.

Chrysler will mail letters to approximately 1,200 of its suppliers setting forth the amounts that Chrysler has determined will be required to “cure” all contracts to be assumed and assigned to the new company.

It appears Chrysler will attempt to not negotiate the amounts that it will pay. Some struggling suppliers may have little bargaining power to ask for more.

Suppliers have ten days to dispute the Chrysler amount, and a court hearing is scheduled for June 4th to resolve differences.

Some of Chrysler’s biggest creditors were not on the list in the court filing, which could mean that they will not be part of the supply chain for the new company.

However, the “list is not a complete or final listing of suppliers” for the new company. “Chrysler will continue to work with those suppliers who wish to become part of the new enterprise,” Chrysler said.    (more…)

General Motors Slashes Production in the Face of an Ongoing Sales Collapse

Sales continue to fall in spite of GM's Total Confidence program.

by on Apr.23, 2009

TK

GM is hoping to trim dealer new car inventories to keep in balance with plunging sales.

General Motors Corporation has just confirmed as reported earlier today that it is scheduling multiple downtime at 13 assembly operations in North America. The closings will range from one to nine weeks in duration, depending on the plant. An unspecified number of  stamping and powertrain plants that supply the final assembly plants will also shut down.  All but two of the U.S. and Canadian plants were already scheduled for the traditional summer shutdown during the weeks of June 29th and July 6th.

GM declined to say how many workers will be affected.  Outside of those in the he plants, there will be no lay-offs of salaried workers, many of whom work on future products. The Auto Task Force was informed of the decision, which has larger political implications, as it considers both Chrysler and GM bankruptcies, which could come as early as next week.

“We’re taking aggressive steps to accelerate our inventory initiatives that have worked well since the first of the year. While sales have been performing at or close to our plan estimates, and dealer inventories have been reduced accordingly, we want to more closely align inventories with even more conservative market assumptions,” said Troy Clarke, GM North America president. “By reducing our inventories even more aggressively we reduce pressure on GM and our dealers, and set ourselves up well for a clean 2010 model year start-up.”

Under these production shutdowns, approximately 190,000 vehicles will be removed from GM’s North American production schedule in the second and third quarter of this year. More than 40% of GM’s North American capacity will be closed at some time or the other during the next 12 weeks, according to GM. GM has already contracted considerably by its closing  of 12 manufacturing facilities in the U.S. between 2000 and 2008. GM will close an additional 14 facilities by 2012. The possibility remains that some, if not all, of the idled plants and related supplier plants will remain closed.

Particularly hard hit are plants in the U.S. and Mexico that make full-size trucks and SUVs, whose sales have all but evaporated. UAW employees will receive supplemental unemployment benefits during the closings, mitigating the effects somewhat. Unknown at this time is the size of the negative effect on GM’s fragile supply base. But one thing is certain, thousands of suppliers will be hurt, and since the industry uses “just in time” delivery of component parts, supplier plants will also shut down in parallel with GM’s. 

Delphi’s unresolved bankruptcy case also is involved in the closings, and GM, through its statement today, is attempting to use the closings to force a resolution of an ongoing dispute with Delphi and its bondholders, which prevents Delphi, a critical supplier to GM, from emerging from its bankruptcy. GM is concerend that selective shut-downs of some  its plants could be in the offing to force it to grant more concessions.

Delphi, sort of,  responded, “Each of the parties have provided proposals for a potential solution that each believed would allow for the successful and rapid resolution of Delphi’s Chapter 11 cases. We remain confident that continuing to aggressively work with all of the stakeholders will result in a satisfactory resolution of these issues. Delphi believes that it is counter-productive to publicly discuss GM’s or Delphi’s restructuring efforts.”

Overall, this is a grim foretaste of what a GM bankruptcy will look like. So the closings will demand the attention of state and national politicians, as media reports and TV coverage describe or show the dire consequences of shutting down so many plants. (more…)

GM Salaried Lay-offs Underway

The former global leader continues to struggle with its turnaround plan.

by on Mar.24, 2009

TK

More white collar lay-offs are underway in Michigan.

While GM is mired in fight with it’s bondholders over converting their debt to stock, the company is beginning to lay off salaried employees as part of its restructuring plan. The employees were selected based on a combination of performance, skills and seniority. In all, some 3,400 salaried employees are scheduled to leave the payroll by the end of April.

The first 160 employees were dismissed at the GM Technical Center in Warren, Michigan.

“It’s very difficult for the employees,” said a GM spokesman, who acknowledged that many of those tapped for layoff had elected to stick with the company through previous rounds of buyouts and cutbacks, going back to 2005. Employees with a minimum of 12 years service at GM are eligible for six months of severance.

GM is also now tallying how many blue-collar employees have agreed to retire early or accept a buyout, said GM spokesman Tom Wilkinson. The opportunity to accept early retirement expired Tuesday.

Meanwhile, there were no signs of progress in GM’s negotiations with both the UAW and bondholders. The negotiations with both are separate but are interconnected. GM is supposed to have negotiations with both the union and the bondholders complete by March 31.

In a related matter, the bankruptcy judge overseeing Delphi Corporation’s bankruptcy case also delayed approval of a deal that would allow the parts supplier sell its steering business to GM. Delphi requested the delay to give the Obama administration’s auto task force more time to review the deal.

The court delay, which stretches until the end of April, suggests the administration is prepared to give GM more time to complete work on the viability plan required under the terms of the bridge loan approved by the Bush administration just before Christmas.