Bankrupt Delphi loses $5B in '06

It gets more time for 'out-of-court' talks with unions

David Shepardson / Detroit News Washington Bureau

Troy-based Delphi Corp. lost $5.1 billion in 2006, including a $2.9 billion restructuring charge, according to a report filed Wednesday with U.S. bankruptcy court.

Also Wednesday, a federal bankruptcy judge granted Delphi's request to suspend its requests to cancel its union labor contracts and certain business agreements with General Motors Corp.

Two orders issued by Judge Robert Drain will give Delphi, GM, the United Auto Workers and other labor unions more time to continue "out-of-court discussions."

Delphi is trying to finalize a deal with a group of investors who have agreed to pump up to $3.4 billion in the parts suppliers. The investors, led by Cerberus Capital Management LP and Appaloosa Management LP, would control a newly recapitalized Delphi once it emerges from bankruptcy.

The bid, however, is contingent on Delphi reaching a complex deal with its unions to lower labor costs and an agreement with GM on its obligations to Delphi. GM has said it expects its costs connected to resolving its issues with Delphi to be between $6 billion and $7.5 billion.

Wednesday was the deadline for reaching an agreement, but the investors have no plans to pull out while talks are progressing, according to people involved. The talks are likely to continue until late February or March.

The next deadline is Feb. 28, but that could be extended as well.

Delphi, which filed for bankruptcy protection in October 2005, lost $2.4 billion on global sales of $26.9 billion in 2006. In December, it lost $461 million.

Delphi said it had $17.2 billion in U.S. sales in 2006, but likely won't disclose its global sales until March, spokeswoman Claudia Piccinin said.

Delphi wants to close 21 of 29 U.S. plants -- including several in Michigan. It has shed 20,000 hourly jobs and thousands of salaried jobs.

Delphi has replaced many workers who took buyouts or early retirement offers with lower-paid temporary workers.

Under a plan approved in U.S. Bankruptcy Court earlier in January, Cerberus and Appaloosa have the right to buy shares in a restructured Delphi for up to $3.4 billion and could own up to 72 percent of the recapitalized company. The group of investors would also get six seats on Delphi's 12-member board. Other investors include Harbinger Capital Partners Master Fund I, Merrill Lynch & Co. and UBS Securities LLC.

Delphi hopes to emerge from bankruptcy in the second quarter of this year.

Appaloosa already is Delphi's largest stockholder, with 9.3 percent of shares worth about $200 million. Appaloosa also owns a large chunk of Delphi bonds.

Since Delphi entered bankruptcy, the company has stopped providing financial guidance, Piccinin said. "It was a substantial loss for the year, which underscores the need for Delphi to reach agreements with its unions and GM in order to bring our U.S. operations into a competitive state," she said. "Delphi has been working hard to improve its operating efficiency, and we have made good progress."

But she added: "There is still much room for improvement."

Delphi had a net loss of $461 million in December, up from $226 million in November and $54 million in October, according to records filed in U.S. Bankruptcy Court in New York

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