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Delphi loss widens on buyouts, decline in GM sales

From Reuters| February 14,2007

Delphi Corp. today posted a wider quarterly net loss as it took more than $1 billion in charges to buy out unionized U.S. hourly workers and sales to General Motors fell.

The net loss widened to $1.97 billion in the third quarter ended Sept. 30, from $788 million a year earlier.

Delphi, which filed for bankruptcy in October 2005, is in talks with its unions and former parent GM over agreements needed to complete a $3.4 billion plan to emerge from bankruptcy.

Revenue fell 4.4 percent to $6.01 billion in the quarter. Sales to GM fell 12.1 percent to $2.6 billion, more than offsetting a rise in sales to other companies of 2.4 percent to $3.41 billion that was mainly from favorable exchange rates.

Delphi took charges of $1.04 billion in the quarter for the buyouts and retirements negotiated with its unions. More than 20,000 U.S. hourly workers opted to leave Delphi in 2006 through either the early retirements or buyouts.

Delphi said it continues to face pressure from GM light vehicle production cuts in North America, price reductions on its parts, commodity costs, and high union wages and benefits, and inflexible union contracts.

Sales to GM have declined since the automaker spun Delphi off in 1999 due to GM production cuts, price reductions on parts supplied to GM, elimination of money-losing business and GM's move toward other suppliers, Delphi said.

Troy, Michigan-based Delphi hopes to emerge from bankruptcy in the first half of 2007. Delphi plans to close or sell 21 of 29 U.S. union plants, several overseas plants, and cut four-fifths of its U.S. hourly workers and thousands of salaried employees.

Delphi also plans to exit several businesses by the end of 2007 for the reorganization, including its brake and chassis systems, interiors and steering businesses. It named Platinum Equity LLC a lead bidder for its steering business in January.

Delphi is reporting operating results in six segments, including four it expects to maintain: audio and entertainment electronics and safety equipment; heating and cooling systems; powertrain systems; and electrical components.

The remaining two segments are steering business, and the automotive holdings group, which covers several business lines and plants that do not fit Delphi's post-bankruptcy focus.

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