Delphi emerges from bankruptcy after 4 years

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After four years of slogging through an obstacle-ridden bankruptcy, the new Delphi formed Tuesday is a much smaller, more focused company.

Troy, Mich.-based Delphi has been sold to create a private company called Delphi Holdings LLP, owned by its former parent, General Motors Co., and Delphi’s bankruptcy lenders.

Delphi CEO Rodney O’Neal, who will stay on as the company’s top executive, said the new company is more prepared to face a competitive, demanding environment.

“Delphi has become more agile, nimble and resilient,” O’Neal said.

Delphi Executive Chairman Steve Miller, an auto industry veteran who led Delphi’s bankruptcy and restructurings at Bethlehem Steel and Federal-Mogul Corp., is expected to step down.

Delphi, which once had more than 40 plants in the United States and 211,000 employees worldwide, now has just four factories here. And one of those is slated to shut down by the end of the year.

As it sold off businesses and shut plants, the company’s U.S. workforce has shrunk from 50,600 four years ago to 14,000 at the end of June.

During the course of its bankruptcy case, Delphi has changed from a catch-all supplier ? a compilation of most of GM’s parts plants ? to a company focused on electronics and powertrain, heating and cooling systems.

David Cole, chairman of the Center for Automotive Research, said the new Delphi has a better chance of success. “I expect to see Delphi become very profitable very quickly,” he said, “assuming the market comes back.”

Delphi’s bankruptcy has faced unprecedented challenges: clashes with the UAW, investors buying in and dropping out, a multibillion dollar financing deal that fell apart, the global credit crunch and even an auction for the company.

The case has been “a unique and difficult situation with some bad luck thrown at it,” said Craig Fitzgerald, an automotive consultant at Plante & Moran.

Delphi was on the verge of emerging from bankruptcy in April 2008, after securing the needed $6.1 billion in financing.

That plan fell apart when a hedge fund that pledged to buy $2.5 billion in Delphi stock dropped out of the deal, just as the recession settled in and months before the credit markets froze and automotive sales plummeted.

More than a year later, Delphi’s fate would move from the hands of Los Angeles-based Platinum Equity to a pair of East Coast hedge funds, Elliott Management and Silver Point Capital, that ultimately helped forge the new Delphi.

They won an auction that allowed them to trade the debt in Delphi’s bankruptcy for a stake in the supplier.

Critical to the deal: GM stepped in to take back four Delphi plants, as well as Delphi’s steering division, to make sure its supply of parts would be safe. GM put up $1.7 billion to ensure Delphi could emerge from bankruptcy.

“Absent that, there’s probably a pretty good chance they would have liquidated,” Fitzgerald said.

The automaker will have up to two seats on Delphi’s new board of directors. Elliott Management and Silverpoint have compiled an additional $900 million for Delphi from more than 20 investors.

Bankruptcy has been costly for Delphi. Attorney and consultant fees since the 2005 bankruptcy filing add up to nearly $500 million through June

This case also has been costly for those who have lost their jobs, and the company’s retirees.

During the case, Delphi cut company-paid health care for salaried workers and dumped its pensions on the federal Pension Benefit Guaranty Corp.

Delphi retiree Jim Tucker, 62, of Canton, Mich., saw his monthly premiums rose from $36 to $333 and soon his pension payments could be cut. Tucker said he feels betrayed by both companies because GM has promised to keep UAW pensions whole but did not do the same for salaried pensions.

“I’m very bitter about it,” said Tucker, who spent most of his career at GM before it spun off Delphi in 1999. “I don’t ever intend to buy another GM car.”

(c) 2009, Detroit Free Press. Source: McClatchy-Tribune Information Services.