As its troubles intensify, Delphi Corp. is taking a closer look at the collection of distressed business units lumped together in its Automotive Holdings Group.
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Insiders say the supplier is considering moving faster to close some of those unprofitable operations — a prospect that brought UAW representatives at Delphi plants around the country to Detroit last week.
The opportunity to sell these units seems more remote than ever.
The problems at Delphi have been overshadowed in recent weeks by the turmoil at rival Visteon and at General Motors. And in fact, the big news coming out of the UAW’s emergency Delphi meeting last week had more to do with GM than Delphi.
During the meeting, UAW representatives voted to discuss with GM the possibility of picking up a larger share of retiree health care costs now borne by the automaker.
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By GlobalDataBut Delphi is affected. GM’s former auto parts manufacturing unit, is covered under the same UAW contract as GM.
Delphi’s group of sickly businesses includes 11 plants, most of which have UAW workers. The union represents well over half of the 11,000 union workers in the Automotive Holdings Group.
Union officials are looking for ways to protect those workers.
But the UAW representatives came together for another reason, too. They are hoping Delphi can get the kind of support from GM that Visteon received this month from Ford.
Analysts don’t expect that to happen.
GM has only limited obligations to Delphi, not the kind of responsibility Ford had for rescuing Visteon. And those obligations will expire when the current GM-Delphi UAW contract expires in September 2007.
GM would have to guarantee pensions and health care for some Delphi retirees, but that is about it.
Delphi is in a stronger position than Visteon.
Indeed, financial institutions led by Citigroup, have pledged a $US2.8 billion credit line to the end of 2009 to replace a $1.5 billion credit line that expires this summer.
Delphi has moved much faster to distance itself from GM than Visteon has from Ford. Still, Delphi’s residual dependence on GM has undercut its earnings prospects.
Delphi lost $409 million in the first three months of the year, well over what it had previously predicted it would lose for the entire year.
Delphi is also in the midst of a government investigation into its accounting practices.
The turmoil at Delphi is underscored by the removal last week of two other financial executives.
Delphi has been the one remnant of the GM-Ford axis that has fought hard to become a global automotive company, developing collaborative Toyota and Honda style purchasing methods, pushing hard in electronics and other high growth businesses, expanding rapidly overseas and moving as fast as possible to win non-GM business.
The degree to which the company remains encumbered to the past however – even with all the right moves it has made – underscores the difficulty that Visteon and other Detroit-dependent suppliers must still face.
SupplierBusiness.com
