Many of Delphi's 3,800 suppliers rely heavily on its payments

Steven Szakaly, an economist with Center for Automotive Research in Ann Arbor, Mich., said many of Delphi's 3,800 suppliers rely heavily on payments from Delphi.

"A lot of them aren't in very good financial shape as it is," he said. "You're looking at a ripple effect quite possibly."

Delphi filed for Chapter 11 bankruptcy Saturday after it failed to reach an agreement in negotiations with General Motors Corp. and the United Auto Workers.

GM spun off Delphi in 1999.

Delphi executives sought concessions -- including slashing wages by more than 60 percent -- arguing the company's cost structure is globally uncompetitive.

Jeff Larison, vice president of Kokomo's Hoosier Spline Broach Corp., said his company has supplied broaches to Delphi plants in Moraine, Ohio, and Saltillo, Mexico.

Broaches are high-powered precision metal cutting tools ranging in size from 10 to 100 inches in diameter.

Larison said Delphi subcontracts at least some of its ordering, adding his company's checks for merchandise sent to Delphi's Moraine facility are handled by Setech Inc.

Setech of Murfreesboro, Tenn., and Charlotte, N.C., offers integrated supply management services, according to www.setechusa.com.

While Delphi only accounts for about 2 percent of Hoosier Spline's business, Larison said the auto industry as a whole accounts for more than 80 percent of Hoosier Spline's business and "as they go, basically we go."

As such, Larison said Hoosier Spline would be vulnerable to a strike.

Message to suppliers

Delphi's new bankruptcy reorganization Web site, www.delphidocket.com, includes letters for U.S. and international suppliers from R. David Nelson, vice president of global supply management.

"As part of our transformation plan, we will need to realign our global product portfolio and manufacturing footprint to preserve our core businesses," the letter to U.S. suppliers reads. "This will require a substantial segment of our U.S. manufacturing operations to be divested, consolidated or wound-down through the Chapter 11 process.

"I want to assure you that we have adequate cash to continue paying for goods and services we need to operate and serve our customers."

Larison said he hadn't seen the Delphi letter and didn't plan to send his company's products unless he can be certain his company would be paid.

"I have things on hold until I find out how the payments are going to be," he said. "Where they are right now is where they're going to sit until I get some kind of personal assurance."

Although Delphi said it will continue to pay its suppliers, the long-term effects of the Troy, Mich.-based supplier's bankruptcy case are uncertain.

Szakaly said many possibilities remain, including UAW concessions, a GM bailout and a strike.

"There are some key products that Delphi makes that are essentially choke points for GM's production," he said.

Szakaly agreed with comments made Monday by AutoPacific vice president Jim Hossack about the enormity of the stakes for Delphi, GM and the UAW.

"This is one of those periods of time that will probably characterize the future of union-management relations for a long time to come," he said. "Whatever Delphi gets, GM is going to want to get, Ford is going to want to get, Chrysler is going to want to get.

"Unfortunately, it's really bad for the workers and for communities like Kokomo."

©2005 The Kokomo Tribune.