Delphi was once the mighty parts operation at GM (NYSE: GM). It got to go out on its own with an IPO, and it has been trouble ever since. Because of contract obligations GM had with its former division, it has poured hundreds of millions of dollars into Delphi.
Delphi has been operating under Chapter 11 and trying, without success, to return to its role as an independent company. Now the collapse of the car business is likely to cause a liquidation of the entire firm.
According to The Wall Street Journal, "Delphi's bankruptcy financing expires at year end, and there are indications that its current lenders may balk at renewing it." Analysts might find it easy to say that Delphi is a microcosm of the car industry and that car companies are heading in a similar direction. That is not true. Delphi has operated under Chapter 11 for some time.
On the other hand, "G.M.'s vice chairman, Robert A. Lutz, said the car companies need money to retool their plants but probably cannot raise enough capital on their own because of the tight credit markets," according to The New York Times. That may be the first time that a top industry executive has indicated the industry may simply run out of cash.
The U.S. auto industry has not caught up to Delphi yet, but it is running toward the same place awfully fast.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
8-29-2008 @ 7:01PM
winslow said...
talk to the line workers at Delphi and you will understand the company cannot survive
8-29-2008 @ 9:06PM
Elaine said...
I have a cousin who has worked for Delphi for years and it has been on the brink for a long time. It should have gone under completely long ago so its long time workers could have found jobs elsewhere instead of hanging on to a dying company
9-02-2008 @ 8:22AM
gerald said...
GM is dropping all it's benifits for it's employees soon. They did this by moving the benefits over to adelphi and then dumping adelphi and the benifits so they could make more money. The govt has a loop hole that makes it all legal.