- Jul 31, 2005
- Reaction score
- Political Leaning
DETROIT - Delphi Corp., the nation's largest auto supplier, filed for bankruptcy Saturday, sending shock waves through a U.S. auto industry already weakened by high labor costs and falling market share.
Delphi's bankruptcy, 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.
UAW officials blasted Delphi's decision to file for bankruptcy one day after sweetening the severance packages of 21 top executives to help persuade them to stay at 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.
Delphi also intends to try to scale back pension benefits, Butler said during Saturday's hearing. "The current level of retirement benefits is unsustainable and will eventually sink the company," he said.
Delphi has 31 plants in 13 states, including Michigan, Ohio, Alabama and California. The company has 185,000 employees worldwide.
Delphi will finance its operations with $4.5 billion in loans, including up to $2 billion in debtor-in-possession financing from a group of lenders led by JPMorgan Chase Bank and Citigroup Global Markets Inc.
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.
Delphi, No. 63 on the 2005 Fortune 500 list of the country's largest corporations, had listed $17.1 billion in assets and $22.2 billion in debt in Saturday's bankruptcy petition.
While Delphi reported $4.3 billion in unfunded pension liabilities at the end of 2004, GM said in a statement released after the bankruptcy court hearing that it could have to assume $10 billion to $11 billion in retirement benefits for union-covered employees who transferred to Delphi as part of the 1999 spinoff.
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. That's 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.
A letter sent from UAW leaders to union members in Kokomo, Ind., earlier this week said Delphi asked the UAW to accept wage cuts of more than 50 percent, to $10-$12 an hour, and eliminate the jobs banks. Delphi also called for a reduction in health care benefits and vacation time.
Delphi also has been plagued by an accounting scandal that the
FBI and the SEC are now investigating. Six people have resigned because of the investigation, including Delphi's former Chief Financial Officer Alan Dawes.