Change Agent

Visteon Corp.'s recent restructuring deal isn't the template for Delphi Corp. in its negotiations with the United Auto Workers union and General Motors Corp., Delphi's top executive says.

The financially beleaguered supplier is looking for help from the union and its No.1 customer to stem losses and realign operations for a profitable future, similar to the path Visteon followed in its retooling deal with Ford Motor Co. and the UAW in May.

But a carbon copy of the Visteon pact, in which Ford agreed to take back 24 facilities and 17,400 UAW workers, probably wouldn't work at Delphi, says Robert S. “Steve” Miller, the crisis management guru recently named chairman and CEO of the company.

“Visteon started from a different point,” he tells reporters, noting that Ford was the official employer for the UAW master-agreement workers at Visteon even prior to the restructuring. “GM is not an employer in our facilities, so I don't see that precise solution here.”

Miller wouldn't say specifically what path should be taken at Delphi, only that financial help is needed and some plant closings are possible.

GM's motivation for pitching in to any Delphi bailout is simple: It could cost GM less to help rescue Delphi than if it allows the supplier to enter into bankruptcy. As part of the original spin-off, GM guaranteed funding of some worker retirement benefits, if Delphi were unable to foot the bill.

Sorting out exactly what that means is difficult, but filing for bankruptcy could allow Delphi to transfer at least a portion of those obligations to GM, which already is strained by its own legacy costs.

The cost of that is hard to calculate, Miller says. But analysts reportedly put the price tag in the billions of dollars. Delphi says its pension program currently is under funded by $4.3 billion, and its total health-care obligation is $9.6 billion.

Delphi, which lost $338 million in the second quarter, has set an Oct. 17 deadline for a restructuring deal, because that is when changes in bankruptcy laws make it more difficult to file, Miller says.

Delphi would prefer a negotiated restructuring deal but is fully prepared to file for bankruptcy, Miller says, pointing out his experience in revitalizing companies both ways.

Miller helped engineer the late-1970s bailout at Chrysler Corp., then worked via bankruptcy proceedings to restructure suppliers Bethlehem Steel Co. and Federal-Mogul Corp. Federal-Mogul, however, has not yet emerged from bankruptcy.

“Chapter 11 is difficult, expensive and time consuming, but it can be done,” he says. “Delphi will be transformed — either in or out of court. The only thing we're sure of is there is going to be a new Delphi.”

If Delphi follows the bankruptcy route, the filing would not involve operations outside North America, Miller says.

Delphi's problems are mostly in the U.S., where high labor costs are making some operations uncompetitive on a global scale.

Miller says core to Delphi is anything where the supplier has a “fundamental expertise.” He says about half of Delphi's business — with some $15 billion in associated revenues — is profitable.