Delphi asks for six months to file plan, withdraws Nov. 15 union proposal

Oct. 17 — the date the new federal bankruptcy law took effect — is shaping up as an important one for Delphi Corp., which is attempting to extend its timeline for offering a reorganization plan.

Delphi filed a 21-page motion Friday in federal bankruptcy court to give it another six months to file its plan. Judge Robert Drain is scheduled to consider Delphi’s request Jan. 5.

Originally, Delphi was scheduled to file its plan Feb. 6 and solicit comments on it through April 6.

Delphi now wants to file its plan Aug. 5 and seek comments through Oct. 4. The supplier argues an extension is warranted because of the complexity of its case.

“It’s certainly a lot of uncertainty, a lot of concern, a lot of chaos,” said AutoPacific analyst Jim Hossack. “I see this as the leading edge of things to come in the next five years.”

Hossack said Monday morning the issues extend beyond Delphi, and even the automotive industry, to all of American manufacturing, which is feeling the strain of lower-wage foreign competition.

Proposal off the table

Delphi filed for Chapter 11 reorganization bankruptcy Oct. 8, citing globally uncompetitive costs.

Based in Troy, Mich., Delphi is the nation’s largest auto supplier with 185,000 employees in six divisions worldwide, including about 50,600 workers in the United States.

Kokomo is world divisional headquarters of Delphi Electronics & Safety and home to about 5,200 of the division’s 29,900 workers.

On Monday afternoon, Delphi announced that in light of General Motors Corp.’s “recent engagement” and discussions with the United Auto Workers union, it is withdrawing its Nov. 15 wage and benefits proposal, “which had been based solely on Delphi’s financial constraints.”

UAW leadership has called Delphi’s two proposals “ridiculous” and “insulting.”

Delphi also announced Monday it would further delay filing to throw out its collective bargaining agreements and modify its health care costs until at least Feb. 17. Previously, Delphi had said it would delay filing these motions until at least Jan. 20.

“Delphi is committed to completing its transformation plan as quickly as possible and to that end, does not intend to comment further on discussion with the unions or GM,” the company’s statement says.

Hossack said there will be increasing pressure for a Delphi resolution, especially after fourth-quarter earnings show increased trouble for Delphi and GM, as well as Ford Motor Co.

GM, the world’s largest automaker, spun off Delphi in 1999.

Although Delphi has diversified its customer base, GM remains its largest customer, and Delphi has been hurt by GM’s falling domestic market share.

GM’s liability to Delphi is unclear, with observers giving a range of zero to $12 billion.

An analyst with Center for Automotive Research was unavailable Monday.

New law vs. old

When Delphi CEO Robert “Steve” Miller visited Delphi’s Kokomo operations in September, it was unclear if Delphi would file for Chapter 11 reorganization protection before Oct. 17.

Miller said in September that Oct. 17 was “a milestone, not a hard and fast deadline” for Delphi to reach an agreement with the UAW and GM, but he gave several reasons why it might be advantageous for Delphi to file ahead of the law change.

Delphi, having filed Oct. 8, is governed by the old bankruptcy law, which gives it the right to file a reorganization plan up to 120 days after it filed for bankruptcy. Extensions are often granted by bankruptcy judges under the old law.

The new law limits the exclusivity period to 18 months and doesn’t grant unlimited extensions.

Miller said in Kokomo the old law had been tested in court for decades, but “you’re going into uncharted waters if you wait and go into bankruptcy after the 17th.”

He said that after 18 months, bankruptcy proceedings under the new law would be a “free-for-all” in which a corporation could be faced with numerous competing recovery plans, adding “this could have the perverse effect of extending bankruptcy.”

Asking for time

Delphi’s relations with its unions have been rocky in recent months.

Many hourly workers were angered when Delphi proposed cutting their wages by more than 60 percent. Delphi contends its costs are several times those of its competitors and such cuts are necessary to make the company globally competitive.

Critics say Delphi is being overly generous to executives while threatening to dramatically cut the wages of blue-collar workers. A union coalition organized an informational picket at all U.S. Delphi facilities against Delphi’s Key Employee Compensation Programs, a plan to award over $400 million in incentives and bonuses to executives that UAW leadership blasted as an “obscene pay-for-failure plan.”

Delphi contends its KECP is necessary because its executives are undercompensated by market standards and it is essential to retain executives with critical business knowledge who are difficult and costly to replace.

Hossack said there is plenty of heated rhetoric between Delphi and the UAW, but it’s impossible to know what’s going on behind closed doors.

“I don’t know if logic is going to prevail or passion is going to prevail,” he said.

Last week, UAW vice president Richard Shoemaker, the union’s chief negotiator, said that “a strike is more likely than not” for Delphi.

Hossack said he doesn’t expect the wage and benefits debate in the automotive industry to end before the next negotiation between Detroit’s Big Three and the UAW.

“I expect an ongoing debate through Sept. 2007,” he said. “Maybe that’s the best we can hope for.”