Delphi looking to GM, UAW for bailout |
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Sun, 07 Aug 2005 12:05
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CHICAGO - Automotive supplier Delphi Corp is currently engaged in hectic parleys with General Motors Corp and the United Auto Workers about a possible restructuring of the firm. This is aimed at avoiding bankruptcy reorganization at its US operations, which have taken a severe beating and have been singularly unprofitable for some time now.
In the backdrop of this announcement, Delphi shares took a 9 percent hit. The firm also announced that it had begun to "to draw $1.5 billion from a $1.8 billion revolving credit facility"- something that firms on the verge of bankruptcy are wont to do. Delphi's Chairman and Chief Executive Officer Robert S. Miller was quoted by the Wall Street Journal as stating that if the talks with GM and UAW were not satisfactory, then the firm could not honor its contract with the United Auto Workers which runs up to 2007."We don't have the wherewithal to go another two years losing money at that rate," Miller told the Wall Street Journal in an interview.
He was referring to the fact that the company had lost $403 million in the first quarter and analysts were predicting an equally worse time for the rest of the year. He was also optimistic that GM and the UAW would not turn their backs at Delphi, "If someone were to publish that the UAW and GM have decided not to help Delphi, then my cash burn would accelerate and things would be over pretty quick. I don't expect that to happen. I expect them to work with us," he said.
Ever since Robert S. Miller joined the company on July 1, speculation has run rife that he is playing”bankruptcy brinkmanship," according to Sanford C. Bernstein analyst Brian Johnson, who however added "I think he's very serious about it if he can't get what he wants."
Delphi shares registered a 17 per cent fall to $4.80 in late Friday afternoon trading.
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