GM, auto workers to pay toll for Delphi bankruptcy
Auto parts maker Delphi Corps bankruptcy filing could result in a multibillion dollar loss to former parent General Motors Corp. as well as thousands of job cuts at Delphis North American parts plants.
On October 8, Delphi, who employs 180000 people worldwide, became the largest US manufacturer to file for Chapter 11 protection. Their reasons for filing included rising pension and healthcare costs as well as the falling market share of main customer and former parent, General Motors.
GM issued a statement Saturday estimating its loss from Delphis bankruptcy filing at as much as $11 billion since the bankruptcy occurred less than eight years after Delphi separated from GM in 1999.
However, GM said it does see some advantages to this development; it has been paying Delphi, its largest supplier of parts, $2 billion annually for parts above market prices.
GM believes that a restructuring of Delphi through the Chapter 11 process provides it with an opportunity to reduce or eliminate that purchase price premium, over time, as well as improve the quality of systems, components and parts it procures, said GM in a statement.
In the meantime, must now close or consolidate almost all of its 45 North American plants, which employ 49000 workers.
Delphi CEO Steve Miller denies rumors that it will pass along its $4.3 billion pension liability to the government and says that it will meet its pension obligations by cutting union wages and benefits as well as moving heavy
production overseas.
As a society, somebody has to pay, and to the shock of the big-three automakers, they've found that customers won't pay when they have choices, said Mr. Miller in an interview with Financial Times.
But not all Delphi employees will pay; management arranged for executive bonus schemes shortly before the bankruptcy decision.
Miller defended the decision, saying that it was the only way to keep talented management needed for restructuring.
The Wall Street Journal cited Delphis bankruptcy as a sign that US auto industry workers will now face the same excruciating restructuring processes as airline and steel workers have endured amid bankruptcies in those industries.