Delphi to file for bankruptcy

Delphi to file for bankruptcy

Delphi Corp. may file for bankruptcy in a New York court on October 8th. Delphi inherited high wage and other costs from its former principal General Motors. However, Delphi's subsidiaries are reportedly not going to file for bankruptcy.

Delphi's approximately 33,000 union workers would have to face pay cuts, forego expensive health care coverage, while it's 12,000 union retirees may receive poor retirement benefits if a bankruptcy is filed for. It employs 15,000 workers at its main plant in Michigan. Since 2000, Delphi had laid off 26,000 employees.It also closed or hived off 140 of its units since 1993.

If it happens, it would be among the 15 largest bankruptcies filed since 1980 with total assets valued at $16.6 billion in the year ending 2004. Its revenue for the same year was $28.6 billion which included $12.7 billion from General Motors.

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Delphi had to undergo financial problems in the past year, such as production cuts at GM, uncompetitive labor costs in the country and rising prices of raw materials. Loss in the first half of the year is estimated at a whopping $741 million.

But there are some analysts who are skeptical about Delphi's poor financial state. They aver that the auto parts manufacturer is filing for bankruptcy before October 17th to escape some stringent restructuring rules which are to be enforced. They also feel that the company is bargaining with the unions by filing for bankruptcy in a bid to cut wages.

Delphi is reported to have approached GM and the United Auto Workers for aid which didn't work out.

The company which parted ways with GM in 1999 manufactures a variety of auto parts, which include satellite radio receivers, ignition coils, steering systems and so forth.

Delphi's stock has fallen to $1.08 now from above $9 last year on New York Stock Exchange when fears started creeping in that the company would file for bankruptcy.