DETROIT, Aug. 8 - The chief executive of Delphi, the big auto parts supplier, said Monday that it might seek bankruptcy protection if it did not considerably reduce its labor costs, a development that could have severe consequences for the industry and its workers. þþIn blunt remarks, Delphi's chief executive, Robert S. Miller, aimed his comments at the United Automobile Workers, the company's largest labor union, and General Motors, its former parent. þþÿWe simply cannot compete and cannot survive long term unless we reduce our costs,ÿ Mr. Miller said in a conference call announcing Delphi's second-quarter results. ÿWe have a labor agreement and a U.S. cost structure that we cannot flex to match changing market conditions.ÿþþDelphi, which has struggled off and on since it was spun off from G.M. in 1999, said it lost $338 million, or 60 cents a share, in the second quarter, compared with a profit of $143 million, or 25 cents a share, in the period a year earlier. Also on Monday, another troubled auto supplier, Visteon, which was spun off from Ford Motor in 2000, said it lost $1.2 billion, or $9.49 a share, in the most recent quarter. Visteon's loss compared with a profit of $24 million, or 19 cents a share, in the period a year earlier.þþShares of Delphi rose 7 cents, or 1.4 percent, closing at $5.03. Visteon rose $1.34, or 15.8 percent, to $9.85. þþTaken together, the losses at the nation's two largest auto parts suppliers show the extent to which rough financial times at Ford and G.M. are trickling down. Both suppliers said their financial problems were due in part to production slowdowns at the automakers. Visteon relies on its former parent for nearly two-thirds of its sales. Less than half of Delphi's revenue is from General Motors.þþVisteon's second-quarter losses were largely due to a $900 million charge it took for transferring 24 of its North American plants and offices back to Ford as part of a revamping agreement the two companies reached in May. Questions about whether a similar agreement could be reached between G.M. and Delphi overshadowed news of both parts suppliers' losses on Monday.þþIt is unclear how much a Delphi revamping would cost G.M., although estimates have been as high as $10 billion. A G.M. spokeswoman, Toni Simonetti, declined to comment on what Delphi has asked of G.M. in its revamping plan.þþÿWe are considering their restructuring proposal in order to determine what participation, if any, would be in the best interest of G.M. or our shareholders,ÿ she said. Delphi has also declined to discuss what it is seeking from its former parent. The U.A.W. did not respond to requests seeking comment on Monday.þþMr. Miller was named the chief executive of Delphi in late June, succeeding J. T. Battenberg, who had run Delphi since it was spun off by G.M. Mr. Battenberg announced his retirement in February, before news surfaced about an investigation by the Securities and Exchange Commission into accounting irregularities. The company has said there was no connection, but Delphi's chief financial officer and several other senior executives have also left the company in the wake of the inquiry.þþDuring a conference call with analysts on Monday, Mr. Miller said bankruptcy was one option Delphi was considering if it did not reach an agreement with both G.M. and the U.A.W. ÿWe will consider other strategic alternatives,ÿ he said, ÿincluding Chapter 11 reorganization for the U.S. operations.ÿ He said each Delphi hourly employee in the United States costs an average of $130,000 a year in wages and benefits.þþIn a note to investors on Monday, Himanshu Patel, an analyst at J. P. Morgan Chase, said Mr. Miller's remarks ÿcould be construed as a veiled threatÿ to G.M. and the U.A.W. He estimated that chances of a bankruptcy filing were less than 50 percent.þþNegotiating tactic or not, the threat of a bankruptcy filing raises the specter of serious troubles. In connection with the 1999 spinoff agreement with G.M., Delphi and the U.A.W. retained the right to certain financial guarantees. For example, if Delphi were to go into bankruptcy protection and default on its pensions, G.M. would be responsible for financing a portion of those pension benefits. According to a filing by G.M. with the S.E.C., however, Delphi has told G.M. that if the automaker were to help it with revamping, it might not be obligated to guarantee those benefits. þþAlso, because of the way the automakers have delegated responsibility for parts, Delphi actually manages dozens of parts suppliers for G.M. If Delphi seeks bankruptcy protection, it could delay or miss payments to those suppliers. They in turn could be forced to seek bankruptcy protection. Likewise, if Delphi does not reach an agreement with G.M., it can ask a court to cancel or reduce its payments to the automaker.At the very least, G.M. would have to find other suppliers.þþDelphi is working against an Oct. 17 deadline, the day a new bankruptcy law goes into effect that will put more pressure on companies to come out of bankruptcy faster. Delphi has told G.M. that the two companies need to agree on a revamping plan by that date, Ms. Simonetti, the G.M. spokeswoman, said.þþ
Source: NY Times
