Delphi Announces Plans for Major Job Cuts

October 09, 2005 by Jeff Shepard

Delphi Corp. (Troy, MI) has filed for Chapter 11 bankruptcy protection and plans to shut down or sell off a substantial part of its US operations. The company is undecided as to whether it will ask the US government to take over its pension obligations. Delphi's troubles would require the company to divest, consolidate, or close a substantial segment of its 45 manufacturing sites in the US and Canada, which employ 49,000 workers. Delphi also plans to renegotiate the contracts and retirement plans of Delphi's 33,000 union workers and 12,000 retirees.

In its filing, Delphi did not detail which or how many US plants it hopes to get rid of. The company previously identified 11 US plants that were unprofitable and could be closed or sold. The filing in bankruptcy court is the latest sign that the US auto industry's unionized workers face restructuring efforts forced on airline and steel workers amid bankruptcies in those industries. The filing also could disrupt the flow of auto parts, force major concessions on the United Auto Workers, and load more costs on cash-strapped auto makers. Former parent company General Motors Corp. is especially vulnerable because it guaranteed benefits of some Delphi workers when it spun the company off in 1999, an estimated obligation at somewhere between $1.6 billion and $6.6 billion. The company's tab for retiree pensions could run another $3 billion to $4.5 billion if Delphi terminates its plan. Meanwhile, Delphi seeks relief from the bankruptcy court, including permission to cut hourly wages.

Additionally, Delphi is moving John Sheehan from Chief Operating Officer to Chief Restructuring Officer. Robert Dellinger will become Chief Financial Officer, effective immediately.