Delphi has reported third quarter net income of $5.2bn on revenues of $4.4bn though the results included gains of $5.7bn related to the GM settlement and restructuring agreements executed in September.
Delphi received cash of $1.2bn from GM related to these agreements, net of $300m of repayments made to GM under the advance agreement. With the cash received from GM, available cash was $1.9bn at 30 September.
Separately, Delphi filed a motion with the US bankruptcy court in New York on 7 November seeking authority to continue use of the proceeds from its DIP credit facility until 30 June pursuant under an accommodation agreement to be entered into between Delphi and lenders.
As part of its ongoing transformation process, on 29 September Delphi transferred $2.1bn of net unfunded hourly pension liabilities to the GM hourly pension plan. GM also received an allowed administrative claim of $1.6bn and assumed approximately $6.8bn of post-retirement benefit liabilities for some active and retired hourly employees, and for this and other claims, received an allowed general unsecured claim of $2.5bn.
Primarily as a result of the assumption of these hourly employee benefit obligations by GM, Delphi recorded one-time gains totaling $5.7bn, including a net reorganisation gain of $5.3bn.
Q3 revenue at $4.4bn was down from $5.3bn in the third quarter of 2007 due to an 11% decrease in GM North America (GMNA) production volume and Delphi’s continued divestiture of non-core businesses. Sales to GM represented 31% of total Delphi revenue in the third quarter of 2008, down from 38% in the third quarter of 2007. Non-GM revenue was $3.0bn for the quarter, representing 69% of third quarter revenue, compared to 62% for the same period last year.
Apart from the GM gain, net income in 2008 was affected by a reduction in warranty costs of $217m primarily related to GM’s forgiveness of $112m due under the warranty settlement agreement. Offsetting these items for the third quarter of 2008 were GMNA volume reductions. The net loss in 2007 included interest expense on pre-petition bankruptcy claims of $369m contemplated in Delphi’s confirmed plan of reorganisation and US hourly workforce transition charges of $197m.
GM has expressed doubt its former parts operation will emerge from bankruptcy any time soon.
“Given the current credit markets and the challenges facing the automotive industry, there can be no assurance that Delphi will be successful in obtaining $3.8bn in exit financing to emerge from bankruptcy,” GM said in an SEC filing on Monday.