Life after Chapter 11
Challenges remain as Delphi marks bankruptcy’s third yearBy LARRY RINGLER Tribune Chronicle
Article Photos
Fact Box
1999
Feb. 5 Delphi President and Chief Executive Officer J.T. Battenberg III rings opening bell for New York Stock Exchange on first day of trading as public company. Shares open at $17 each.
May 21 Stock hits high of $21.88 in intraday trading.
May 28 GM distributes remaining shares to complete spinoff. Delphi Packard Electric workers buy more shares than any other Delphi division 1.063 million.
2005
Feb. 23 Battenberg announces his retirement.
June 23 Veteran turnaround specialist Robert S. ''Steve'' Miller is named chairman and CEO, saying he won't seek bankruptcy protection to reduce company's labor and health care costs.
Aug. 5 Company says it's in talks with its main unions and GM about restructuring its U.S. operations to avoid bankruptcy.
Oct. 8 Delphi files for Chapter 11 bankruptcy protection. Company lists liabilities of $22.2 billion and assets of $17.1 billion for U.S. operations. Profitable foreign operations aren't included.
2006
March 31 Delphi unveils transformation plan that puts five Delphi Packard Warren plants in ''core'' group of surviving operations. Company plans to shed 21 of 29 factories nationally, and cut hourly work force to 6,000 from 33,000. Average hourly wages will fall to $16.50 on Sept. 3, 2007, if GM makes up difference from Delphi's earlier $12.50 offer.
Aug. 16 Some 3,130 Delphi Packard workers take the offer to retire or quit, leaving Delphi Packard with about 670 workers, fewer than the 1,033 jobs it planned to retain.
2008
Jan. 25 Delphi's reorganization plan OK'd by bankruptcy court, clearing way for company's exit from bankruptcy.
April 4 Lead investor Appaloosa Management LP pulls its $2.55 billion cash injection in dispute over GM's role in financing package Delphi had obtained.
Sept. 23 Bankruptcy court approves freezing of Delphi hourly and salaried pension plans and implementing new ones.
Sept. 26 Court authorizes amended agreements calling for GM to cover about $3.4 billion in Delphi's union pension plans and provide $1.2 billion in cash for operations.
Source: Tribune Chronicle files
WARREN - Many hard-won union gains are gone. City leaders face a $1 million drop in income tax revenue this year.
Throw in a credit crunch that's making it hard for even healthy companies to find cash, and the challenges facing Delphi Corp. as it nears the the third anniversary Wednesday of its Chapter 11 bankruptcy filing take shape.
The parent of Warren area Delphi Packard Electric on Friday filed in bankruptcy court modifications to its amended reorganization plan, which includes new financing from former parent General Motors Corp. and other changes.
A preliminary hearing is scheduled for Oct. 23 in bankruptcy court in Lower Manhattan, with the final hearing set for Dec. 17.
In news reports late last week, the architect of Delphi's bankruptcy, Robert S. ''Steve Miller'' cautioned the auto parts maker may not leave bankruptcy by year's end, as was anticipated. The company has to shop around an amended reorganization to raise as much as $4 billion in a financial crisis considered the worst since the Great Depression.
Delphi spokesman Lindsey Williams called recent changes in Delphi's agreements with GM ''significant in terms of moving the process forward. When you look at all the downside in the economy, it's telling that we've done all the things we set out to do in our transformation plan.
''The bankruptcy has gone longer than we anticipated when we filed, but we've made significant progress,'' he said.
That reorganization includes changes in work rules and conditions that a local labor leader said are ''very disturbing'' for people long involved in the union.
''So many unprecedented events have occurred - major concessions in wages and benefits, losing the Lifetime Job and Income Security Agreement,'' said Mike O'Donnell, shop chairman of IUE-CWA Local 717 at the Warren area Delphi Packard Electric operations.
The latter was a 1984 agreement that protected workers' regular income in the case of layoffs. It was widely hailed for years as a model of labor-management cooperation.
Meanwhile, Warren Mayor Michael O'Brien said the city is the victim of a ''double whammy'' - losing scarce tax dollars and not being able to offer vacant factory space to new employers who would help replace the lost revenue.
He said the city's income taxes averaged $1.4 million a year from 2001 through 2005 related to Delphi Packard's Warren headquarters and various plants.
That total shrank to $619,000 in 2007 after the auto parts maker shed 3,130 workers through retirement and buyout payments offered in 2006.
The projection for this year: $125,000 to $150,000, he said. The tax losses stem from drastic downsizing of the hourly work force from 3,800 at the filing to 750 now, largely done through early retirement and buyout offers of as much as $140,000.
''It's an obvious financial problem. There's still the need for services in the city, but we have $1 million less to operate with,'' he said.
Adding to the problems is that the length of the Delphi bankruptcy is preventing city officials from putting new employers into the buildings Delphi Packard has vacated in Warren, where the Packard brothers founded the business in 1890.
''We have potential companies that would like to use the facilities, but the buildings aren't available right now because they're tied up in bankruptcy court. It's a double whammy - we lose jobs and we can't replace the jobs because we're not permitted to have the facilities just yet,'' O'Brien said. ''A light at the end of the tunnel would at least be the end of bankruptcy.''
Key bankruptcy court actions in late September are seen as pushing the company closer to leaving bankruptcy around year end. Former parent, General Motors Corp., will assume $3.4 million in Delphi pension obligations for hourly workers and kick in $1.2 billion in cash to give Delphi ''ample liquidity'' through year end - an important element considering the deepening global credit crisis.
In all, GM will contribute about $10.6 billion to help Delphi get out of bankruptcy, up from $6 billion.
Local 717's O'Donnell found irony in the fact GM has to help fund Delphi's emergence from bankruptcy, especially since the automaker planned to save money by spinning off the parts division in 1999.
The spinoff allowed GM to get what it couldn't win at the bargaining table lower wages and benefits, he said. Now, however, GM is shelling out more in courts because Delphi can't find funding to get itself out of bankruptcy.
O'Donnell echoed the common speculation among union workers that GM helped push Delphi into bankruptcy with its demands for lower parts prices.
He noted GM got a commitment after the spinoff from Delphi that it had to lower its auto parts prices by certain percentages to match prices of suppliers outside of GM if it wanted to keep its GM business.
At the same time, the IUE-CWA and UAW got commitments from Delphi before the spinoff that their wages and benefits would be patterned on what the UAW got from GM for assembly, putting the fledgling company in an nearly impossible situation.
''In hindsight, experienced union leaders like myself and others should have recognized that ahead of time,'' O'Donnell said. ''We all got caught up in the optimism of Delphi going out on its own, and the hype that now we could pursue non-GM customers, and that would make us grow.''
GM spokeswoman Renee Rashid-Merem countered that ''it's been well documented that Delphi's pricing has been at a premium to GM and not as competitive as other suppliers that can provide similar business. That's part of what their restructuring is aimed at doing get Delphi into a position where they can be competitive in the businesses they choose to be in.''
She said GM has shown during the last three years that it's been ''actively engaged with Delphi in trying to help them develop a plan that will allow them to successfully emerge a stronger company.
''Delphi was independent six years prior to filing bankruptcy. They had six years to attract new customers and adjust their business to how they felt appropriate. To suggest it (bankruptcy) was expected is inaccurate,'' she added.
Delphi was able to win non-GM customers, but those customers also wanted lower prices, which forced Delphi to shift more production to lower wage countries like Mexico, O'Donnell said.
Because foreign factories and other operations are profitable, Delphi didn't include them in its bankruptcy filing, something that rankles many observers.
John Russo, co-director of Youngstown State University's Center for Working-Class Studies, termed Delphi's bankruptcy as its ''getaway.''
''Delphi had the separation agreement (from GM), and almost immediately started expanding their international operations,'' he said. ''Then they attempted to negotiate agreements with the unions that were below agreements with other auto suppliers. Then they went into bankruptcy and attempted to push pension obligations onto GM and the PBGC (Pension Benefit Guaranty Corp.).''
Besides the impact on workers and suppliers, the bankruptcy is taking its toll on communities such as Warren where Delphi and workers were major taxpayers, he added.
The bankruptcy's legacy, Russo said, will be gauged in how successful Delphi will be in its ''getaway.''
''It looks like they will be,'' he said.
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anniemae
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10-05-08 8:28 PM
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"temporary full time"??? that's union garble. I can guarantee you that NO union official has taken a pay cut, freeze, etc. But when they close Delphi's doors, they'll get a taste of their own medicine. They are known to fight for themselves & not so much for their members. As long as they're making 6 figures, they truly could care less about those they represent....plus they don't put in a good 8 hours. Even with overtime, they're just "on the clock"...spreading some B.S.
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ohiojohn
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10-05-08 5:21 PM
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this whole mess was a blessing in diguise for me! I love my new job and hope to keep doing it until I retire. As For GM and Delphi? I rmember being told when i got hired in 94, "You are a temporary full time employee don't expect to retire from here!" That uniion member was right on too!
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BLKPNTHR67
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10-05-08 10:29 AM
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With all these money problems how many city & county unions will take pay cuts, or even pay freezes to help out? My guess, none.
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OldManGrump2
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10-05-08 8:57 AM
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Forget Delphi, Warren needs to contract it's budget because the parts supplier will never come back to the level of income tax provided to the city. Warren needs to cut non-safety force city labor to the bone while leaving safety forces in place to provide protection to the city residents. There is NO answer to Warren's money problems, but it certainly wouldn't hurt to balance the budget and minimize un-necessary spending now. An income tax increase is out of the question - who can afford to pay more these days? When will new jobs ever come to Warren and the Mahoning Valley? Only when the union mentallity goes away for good.
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