Delphi Emerges From 4-Year Bankruptcy Protection
NEW YORK (AP) — Auto parts supplier Delphi finally exited bankruptcy protection on Tuesday nearly four years to the day it filed for Chapter 11.
Delphi emerged as a new company after completing a deal with its lenders and receiving a promise for billions in loans from GM, which once owned Delphi and buys critical parts from them.
Delphi's survival ensures a steady stream of parts to General Motors Co., which spun off the company in 1999. GM has invested heavily in Delphi over the last four years to keep it from disappearing.
Weighed down by high labor costs, production cuts at GM and increasing foreign competition, the auto supplier filed for Chapter 11 on Oct. 8, 2005, the largest bankruptcy protection filing for the industry at the time and the 13th largest in U.S. history with $17.1 billion in assets.
Delphi Holdings LLP, created by the company's emergence from Chapter 11, said Tuesday it has finished acquiring most of Delphi Corp.'s core businesses under its restructuring plan.
The exact details of the plan have not been publicly disclosed. Delphi is now a privately held company and doesn't have to reveal financial information.
"We expect that the industry and the competitive environment will continue to be demanding, but the restructuring we have already completed creates a strong platform and we expect to capitalize on that," said Rodney O'Neal, who will remain as president and CEO of the new Delphi.
Detroit-based GM, dependent on the supplier for about 10 percent of parts that go into its North American vehicles, said Tuesday that its deal with Delphi and its lenders had closed.
As part of Delphi's plan to emerge from Chapter 11, GM said it would take back some of the supplier's businesses. They include a Saginaw, Mich.-based steering business and plants in Lockport and Rochester, N.Y., Wyoming, Mich., and Kokomo, Ind.
Another key part of the plan was GM's promise to contribute billions more in aid to help finance the restructuring deal. As it restructured and emerged from bankruptcy protection this year, GM received $50 billion in aid from the U.S. government, which now owns 61 percent of the automaker.
"We're pleased to see a final resolution to the bankruptcy," GM President and CEO Fritz Henderson said in a statement.
The Troy, Mich.-based company had struggled to make a profit since its separation from GM and lost $4.8 billion in 2004. Its bankruptcy filing the following year marked a turning point for the auto industry, foreshadowing a rash of supplier bankruptcies and those of General Motors and Chrysler.
Over the past four years, Delphi has cut thousands of jobs and sold off a number of plants and businesses as part of its overhaul. Its product lineup will continue to focus on electronics, safety, powertrain and thermal systems.
On July 30, the bankruptcy judge overseeing Delphi's case approved the auto supplier's plan to hand control of the company to its lenders in exchange for the forgiveness of a combined more than $3 billion in debt. That paved the way for Delphi to emerge from Chapter 11.
Elliott Management and Silver Point Capital, the senior lenders that spearheaded the acquisition, said they believe the deal "will provide a solid financial foundation for the company's growth."
Delphi nearly emerged from Chapter 11 last year, but was forced to redraw its reorganization plan after a group of investors, led by the Appaloosa Management LP hedge fund, pulled out of an investment deal in April 2008.
After that, Delphi struggled to find the financing it needed to restructure. Those troubles were complicated by the collapse of investment banks in the fall and the drop-off in new vehicle sales.
Months later, those factors also helped drive both GM and Chrysler into Chapter 11.
In June, Delphi had agreed to let an affiliate of Beverly Hills, Calif.-based Platinum Equity take control of most of its businesses with the help of billions from GM. But Delphi's lenders balked at the deal and submitted their own bid which ultimately won out over the deal with Platinum after an 18-hour auction process.