Largest U.S. auto supplier struggles with bankruptcy

Delphi Corp., the nation’s largest auto supplier, said it is suspending a Dec. 16 bankruptcy court hearing to eliminate union contracts because it believes an agreement between its unions and former parent company is within reach.

Delphi filed for Chapter 11 bankruptcy protection Oct. 8 after efforts to win concessions from its labor unions and a multibillion-dollar bailout from former GM owner.

The filing gives Delphi, which lost $4.8 billion last year, relief from its creditors, the opportunity to develop a plan that will include closing plants and imposing lower wages on workers.

GM is Delphi’s largest customer and Delphi supplies some parts for all GM vehicles.

Due to the events with Delphi, U.S. carmaker General Motors plans to cut 30,000 jobs in North America in a restructuring attempt that aims to save $2.5 billion a year and revive the company.

These job cuts represent only about nine percent of GM’s global work force, which is about 325,000 people.

“The situation does not directly affect me. It is a big problem with cutting 30,000 jobs. Where are those people going to work?” said Marquita Taylor, a third year business student from Chattahoochee.

GM plants earmarked for closure under the plan are in Oklahoma, Mich., Tenn., Ga. and Ontario in Canada; production will cut back in Ohio and at GM’s second Canadian plant. The move, along with other cutbacks, is a bid to reduce costs by $7 billion in the U.S. by the end of 2006.

“Although I am not personally affected by the decisions made by GM, the effects of unemployment will definitely be seen throughout the communities,” said Jason Caldwell, a senior pharmacy student from Detroit.

Rick Wagoner, chairman and CEO of General Motors Corp., in a report on BBC news stated, “…the decisions we are announcing are very difficult to reach because of their impact on our employees and the communities where we live and work.”

Wagoner continued, “…but these actions are necessary for GM to get its costs in line with our major global competitors. In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible.”

GM has been crippled by high labor, pension, health care and raw material costs, as well as by sagging demand for sport utility vehicles and their bloated plant capacity.

In addition, its market share has been eroded by competition from Asian automakers led by Toyota Motor Corp.

GM lost nearly $4 billion over a span of nine months in 2005.

Bank of America recently raised the odds on GM filing for bankruptcy in the next two years to 40 percent. Since GM’s main parts supplier is fighting bankruptcy, any action would disrupt production lines and cost GM millions of dollars during a time when its losses are already high.

However, Wagoner said, “I would like to set the record straight here and now; there is absolutely no plan, strategy or intention for GM to file bankruptcy,” in a letter to employees, which was posted on an internal website.

Hypothetically speaking, what would happen if GM were to file bankruptcy? It probably would be the most massive Chapter 11 filling of all time, a watershed moment in the history of American business, with far-reaching consequences for all of GM’s stakeholders.

While the direct impact on the national market would be relatively modest, the Midwest would be hit hard by the combination of job losses at GM and its suppliers, while benefits for the company’s retirees would be cut significantly.

To add to its woes, the firm warned earlier this month that it would have to restate its 2001 accounts after they were overstated by about $300 million; the US Securities and Exchange Commission is also investigating those accounts.

GM has lost more than 40 percent of its value this year. The GM announcement is the largest single U.S. layoff announcement since K-Mart announced 37,000 job losses in 2003.

Contact Cherline Pierre at