Delphi Demands Price Hikes

[ChevroletRevived]

Delphi demands price hikes


DETROIT -- As General Motors bails out Delphi Corp., its former parts operations, the automaker is harvesting some bitter fruit that it has sowed.

Delphi was driven into Chapter 11 bankruptcy protection in large part because of its huge losses on the sale of components to its former parent.

In documents filed in U.S. Bankruptcy Court in New York on Friday, March 31, Delphi revealed shocking losses on thousands of GM contracts. Delphi seeks permission to void the contracts and renegotiate them at higher prices with a customer that has forced prices down aggressively.

The filing came as Delphi revealed its long-anticipated restructuring plan that would slash labor costs by voiding union contracts, close or sell all but eight U.S. factories and eliminate 25 percent of all white-collar jobs.

The documents list 21 U.S. Delphi plants that suffered big losses on GM business. Those plants saw a combined $1.47 billion in operating losses last year. In a sign of why Delphi CEO Steve Miller felt compelled to file for Chapter 11 protection, the losses at those plants are expected to swell to $2.1 billion this year.

The figures are contained in the reorganization plan.

Now GM will have to pay the piper. Last week, Miller demanded that GM agree to pay higher prices for a wide range of products. "We simply cannot continue to sell products at a loss," Miller bluntly warned in a press release.

On Friday, Delphi asked the bankruptcy court for permission to break 5,472 GM contracts and renegotiate more favorable prices. Delphi also wants to renegotiate 400 GM contracts that have lapsed. The supplier has continued to supply components specified in those lapsed contracts on an interim basis.

Moreover, Delphi demands assurances that GM will not award Delphi's contracts to rival suppliers.

GM has been Delphi's biggest customer since 1999, when the supplier was spun off from GM. Since then, Delphi has worked hard to diversify by lining up more non-GM customers.

Indeed, Delphi's worldwide sales to GM last year totaled $12.8 billion, down from $22.3 billion in 1999.

The company says it is losing money largely because it inherited an overpaid hourly work force. An average Delphi worker earns $54 per hour in wages and benefits. Rival U.S. suppliers pay workers half as much.

Delphi expects the court to hear its motion to cancel the GM contracts on May 12. The court is scheduled to hear Delphi's request to cancel union contracts on May 9 and 10.

GM's muted response

Miller's take-no-prisoners approach triggered a muted response from GM, which has been in three-way negotiations with Delphi and the UAW.

"We disagree with Delphi's approach (to canceling GM contracts), but we anticipated that this step might be taken," GM CEO Rick Wagoner said in a statement. "GM expects Delphi to honor its public commitments to avoid any disruption to GM operations."

When Delphi emerges from bankruptcy it will have to sell its parts to someone, noted GM spokesman Jerry Dubrowski. "It's in our mutual interest to reach a consensus," he said.

Delphi's 345-page petition offered an unusually detailed glimpse of the financial bind that led to bankruptcy court. Money-losing products include commodity components such as brakes, batteries, oil filters, spark plugs, generators, hoses and moldings.

For example, the petition singles out the Needmore brake plant in Dayton, Ohio, as one of Delphi's most unprofitable factories. That plant expects to lose $200 million this year - a huge loss given its annual revenue of just $307 million.

Ironically, Delphi plans to keep four of its most unprofitable plants: Lockport, N.Y.; Kokomo, Ind.; Rochester, N.Y.; and Grand Rapids, Mich.

More at link: http://www.autonews.com/apps/pbcs.dl...3/1003&refsect=

[zl-1]

The pressure mounts: first the UAW contracts, and now contracts with GM.

[kenman923]

Looks like things could get ugly.

[fkh1]

in all honestly though, what choice did they have, we all should have seen this comming. its funny how GM pushed and pushed for yrs for lower parts pricing, well things are coming home to roast now. its either pass on the increases to the customer, like toyota does or comtinue to suffer low quality parts and parts availabilty...something has to give.

[fkh1]

Also remember guys, Miller isn't out to help Wagoner, his interest are sole thats of Delphi and its share holders, as much as you may not like the guy or like him, he has to do this...people didn't take this guy serious, I mean look what he did at Bethlehem and other companies he captained. He is shaking Detroit up in more ways then one!

[mjd1001]

Originally Posted by ChevroletRevived

Delphi demands price hikes


DETROIT -- As General Motors bails out Delphi Corp., its former parts operations, the automaker is harvesting some bitter fruit that it has sowed.

Ironically, Delphi plans to keep four of its most unprofitable plants: Lockport, N.Y.; Kokomo, Ind.; Rochester, N.Y.; and Grand Rapids, Mich.

Why would they keep those plants if they are so unprofitable?

On the other hand, it shouldn't matter to Delphi, but the Lockport plant is only about a 1 hour drive from Rochester. I know some people in Lockport, NY. If Delphi shut down there it would affect the entire city in a large way. With Rochester NY only being an hour away, it would have a huge impact on the area.

Of course, Lockport is so close to Buffalo that it is almost a suburb....and that makes it even worse. There aren't exactly tons of jobs flowing out of Buffalo for these people to pick up.

But hey, the story is the same across much of the country, especially the midwest with regard to auto makers and suppliers.

[steverino]

Originally Posted by mjd1001

Why would they keep those plants if they are so unprofitable?

On the other hand, it shouldn't matter to Delphi, but the Lockport plant is only about a 1 hour drive from Rochester. I know some people in Lockport, NY. If Delphi shut down there it would affect the entire city in a large way. With Rochester NY only being an hour away, it would have a huge impact on the area.

Of course, Lockport is so close to Buffalo that it is almost a suburb....and that makes it even worse. There aren't exactly tons of jobs flowing out of Buffalo for these people to pick up.

But hey, the story is the same across much of the country, especially the midwest with regard to auto makers and suppliers.

Maybe those plants produce parts critical for Delphi's turnaround, that with the right labor cost could make the plants profitable.

[frenstall]

No matter what this is dangerous ground and I'm not sure if it's press twist or what but it appears Delphi is pointing a lot of fingers outwards and never at themselves. They weren't forced to accept contracts at a loss, and it sounds to me as though they did drive their own efficiency hard enough, they just went the GM way and drove for volume, volume, volume. Now thousands of people are going to suffer and GM is in no stance to spend more money... I fear the outcome of Delphi will define if GM goes bankrupt, they are the deal breaker.

[Member17739]

Originally Posted by frenstall

No matter what this is dangerous ground and I'm not sure if it's press twist or what but it appears Delphi is pointing a lot of fingers outwards and never at themselves. They weren't forced to accept contracts at a loss, and it sounds to me as though they did drive their own efficiency hard enough, they just went the GM way and drove for volume, volume, volume. Now thousands of people are going to suffer and GM is in no stance to spend more money... I fear the outcome of Delphi will define if GM goes bankrupt, they are the deal breaker.

Delphi had to drive for volume. When you don't have an ability to release unneeded workers your only chance is in volume.

[BurnieMET13]

About one of the four unprofitable plants, Kokomo, Ind., I can somewhat see the need to keep. At one time, there were multiple plants all over that did numerous different things, some being manufacturing. Within the last 10 years though, manufacturing has dropped substationally. Delphi is still a huge company though, employing MANY people in Kokomo... mostly being engineers. Seems to be a lot of Delphi product engineering going on there. With manufacturing declining, they only closed one and a half plants out of the 4. It really does appear that 1/3 of Kokomo is a Delphi employee (another 1/3 being employees at the DaimlerChrysler transmission plant), but don't really quote me exactly on those numbers, its just "appears" that way. So yeah, Kokomo is probably going to survive, or atleast have a bit of fat trimmed, but still stay unprofitable by the numbers because of the many top-end engineers that work there and little manufacturing.

Can you tell that I grew up in Kokomo? :-) A lot of my friends dads were engineers there, some I thought were extremely intelligent, some I wondered what they did all day... if that explains ANYTHING about how Delphi is ran. My 2 cents on how it looks around here.

[Havasavana]

Originally Posted by steverino

Maybe those plants produce parts critical for Delphi's turnaround, that with the right labor cost could make the plants profitable.

I wonder if what is made at Lockport is more expensive or impratical to ship. I understand that Lockport makes radiators and condensers. I noticed that the Visteon plant in Connersville, In. was not on the list of plants that Ford bought back awhile back. These plants are to be sold off/closed as I undestand it so it seems the Connersville plant will remain open under Visteon, and it makes radiators and condensers too.

[delmarjohn]

please these are grown men ..if delphi reps agreed to these contracts and new in advance they were losing money on each contract THEN whos to blame the person who asks or the person that grants the wish....You have to give GM credit for asking but saying GM is to blame is a reach ,please remeber that deplhi since being spun off has repeatedly said it was looking to diversify and add more customers to its base ,and What actions did it take to stave off the inevitable .....this reminds me years ago of when GM owned frigidaire and spun it off when the workers wanted the same pay as the uaw wrokers ...GM said that could afford to pay them above the industry standard but not the UAW scale,thye said NO deal ,GM said take it or we will be forced to sell the unit ,they called GM'S bluff and several days later GM sold the unit to westinghouse......

[fullsizefan]

It may not be an easy pill to swallow, but GM brought this one on themselves. Remember, Delphi used to be a part of GM. To this day, the Delphi contract with the UAW is a pattern image of the one with GM. Yet, GM has used its "global" leverage to drive Delphi's prices to be competitive with the worldwide supplier market. Unfortunately for Delphi, it doesn't have the flexibility to just walk away -- it has to pay any laid-off workers a significant percentage of the wages whether they work or not. So, Delphi has taken on a lot of marginal business, with not a lot of sympathy from GM for the legacy costs GM burdened Delphi with. We have all seen GM purchasing types call for more "low cost country" content. HELLO.... what the heck did they think would happen at Delphi? To me, this is one big DUH that Wagonner and company should have seen coming long ago.

To be honest, I think GM management (and Ford and DCX) is quitely hoping Delphi busts a big hole in the UAW stranglehold on labor costs. While this could create a serious headache (ie., strikes) for GM in the short-term, getting UAW wages and benefits competitive with the rest of the US automotive manafacturing sector (Toyota, Honda, Hyundai, etc.) is what GM need for the long-term.

Besides, if Northwest can easily replace a few thousand highly skilled jet aircraft mechanics almost overnight, how hard can it be to find people to fill positions at your typical Delphi plant?

[fkh1]

everyone keeps mentioning about just replacing the delphi guys if they strike, but my question is and if someone knows, how long does it take to train and learn to run all that equipment, with QUALITY workmanship

[mmm...bowtie]

I also am from Kokomo and a lot of product development does go on there (my dad being one of those engineers). That location is also the world headquarters for the Electronics and Safety division of delphi so I don't think it's really an option to close it.