Hogans_Heroes

It doesn't appear that Delphi will flinch. http://biz.yahoo.com/rb/051007/autos_delph...uptcy.html?.v=3 Sources indicate Delphi will file for bankruptcy in a New York court TOMORROW! Reuters Delphi set to file for Ch. 11-source NEW YORK (Reuters) - Delphi Corp. (NYSE:DPH - News) is expected to file for bankruptcy in a New York court on Saturday, a source familiar with the situation said on Friday. The board of the Troy, Michigan-based company is set to meet on Saturday morning to make the final decision on filing for bankruptcy, the source said. A Delphi spokeswoman declined to comment. Delphi, succumbing to high wage and benefit costs inherited from former parent General Motors Corp. (NYSE:GM - News), has lined up debtor-in-possession financing from a consortium of banks led by Citigroup Inc (NYSE:C - News) and JPMorgan Chase & Co. (NYSE:JPM - News) Delphi has a number of large foreign units, but those subsidiaries are not expected to be part of the bankruptcy filing, the source said. Delphi is represented by Skadden, Arps, Slate, Meagher & Flom and Shearman & Sterling, while General Motors -- which is by far Delphi's largest customer -- is represented by Weil, Gotshal & Manges. The auto parts maker is not cash-strapped but is filing to take advantage of current, more lenient, bankruptcy rules, which are set to change on October 17, making reorganizations more challenging. It is also filing to pressure its unions to come up with wage concessions. Delphi's stock, which has traded above $9 during the last 12 months, fell $1.08 to close at $1.12 on the New York Stock Exchange on Friday amid concerns the company may be unable to reach a deal with GM and its unions to avert a bankruptcy filing. Delphi, which has struggled since its spinoff in 1999, had said it needed help from GM and the United Auto Workers to restructure money-losing operations or it would consider a Chapter 11 filing covering its U.S. units. A Delphi bankruptcy would be among the 15 largest since 1980, according to the BankruptcyData.com Web site, based on total assets of about $16.6 billion at the end of 2004. Delphi had revenue of $28.6 billion in 2004, including $12.7 billion from GM in North America. Delphi in June hired turnaround specialist Steve Miller as chief executive and chairman with the aim to restructure outside bankruptcy. Miller previously was nonexecutive chairman at bankrupt auto parts maker Federal-Mogul Corp. (OTC BB:FDMLQ.OB - News) and chief executive of Bethlehem Steel. Miller had said changes in U.S. bankruptcy laws effective October 17 would be a consideration in whether it filed for court protection. The changes restrict how much time a debtor has sole control over a reorganization and its retention of executives. Several months ago, Delphi hired Rothschild Inc. as a strategic adviser and Skadden, Arps partner Jack Butler for legal advice. Butler served as lead counsel to Kmart during the retailer's reorganization. Delphi posted net losses of $741 million in the first half of 2005, weighed down by high wage and benefit costs inherited from GM and the automaker's production cuts in sport utility vehicles and other slow-moving models. Delphi had about 185,200 employees worldwide at the end of 2004, including 37,300 salaried and 147,900 hourly workers. Nearly 75 percent of hourly workers were union-represented, including 25,200 by the UAW. Delphi's UAW contract runs through September 2007. Under a supplemental agreement in 2004, Delphi is allowed to pay new hires lower wages and benefits, but industry conditions have left no meaningful hires under the program. Delphi wants to eliminate a jobs bank that includes 4,000 idle UAW workers, trim its work force beyond that and cut wages and benefit rates to a supplier level. The UAW has asked GM to take back up to 7,000 Delphi workers. The auto parts supplier restated financial results for 2001 through 2004 after an internal probe into accounting improprieties that forced out its chief financial officer and five other executives. Ford Motor Co. (NYSE:F - News) recently completed a bailout of its former parts unit, Visteon Corp. (NYSE:VC - News), taking back plants and other facilities and union workers. Most of the facilities will be prepped and sold.

The always excellent Daniel Howes: http://www.detnews.com/2005/insiders/0510/07/A01-340908.htm "GM isn't keen to bail out its offspring, nor can the union take the proffered "deal" and still claim to be a union." "Never before have UAW workers been asked to absorb such Draconian cuts -- not in the dark days of the Chrysler bailout, the oil shocks of the 1970s or the periodic crunches since. The sickening part for those at Delphi trying to put in a day's work is that rejecting the demands won't make them go away, because they're considered "market rate" outside the UAW-Big Three bubble and are likely to return during a bloody bankruptcy." "Whether yours is a union house or a management house, whether your grandpa was at Ford's Battle of the Overpass in '37 or managed a plant for GM in '87, the significance of an impending Delphi bankruptcy and GM's parallel talks with the UAW for health care concessions cannot be overstated." "A cornerstone of 20th-century industrial America, whose labor helped vanquish the Axis powers in World War II and laid the foundation for unparalleled prosperity, is perilously close to crumbling under the pressure of late-20th-century mismanagement and 21st-century competition." ===> It's touching, really. Reading those words. But it was bound to happen. And, as he and everyone else is pointing out, it's going to happen. Via negotiated terms or settled terms. Like Josh was saying about the airlines, the steel companies... I just cannot help but compare General Motors to Bethlehem Steel. No one could ever believe it could fall. And of course, in the end, that was part of the problem. Perhaps now interested parties might acknowledge that GM, too, can fall (talk about there being no joy in Mudville).

"It's called mismanagement. Take these damn seat holders/board folk accountable for what they do and say and run with it. If they can't get the job done (READ; WAGONER) then get their asses out of the f&*cking seat." Josh, certainly there should be management accountability for the troubles of what was once the greatest company in the world. And GM is a case-study in mismanagement; I am in complete agreement with you there. While it does appear some of the concessions won by the UAW over the years from the automakers was bound to be unsustainable (at least in the case of inherited concessions at the spun-off parts makers), the speed at which some of these wins will need to be surrendered is certainly hastened by significant bungling and ineptness on the part of management. By the way, I'm REALLY getting to like this website: http://futureoftheunion.com/docs/uaw/Delph...egotiations.pdf

Here is a Pdf of the ballyhooed Delphi-UAW letter: http://www.futureoftheunion.com/docs/uaw/o...updatefront.jpg http://www.futureoftheunion.com/docs/uaw/o...rupdateback.jpg I have to say I've been sitting on similar stuff for a very very long time, but cannot go into detail. This is coming to a head, folks. Pretty much everything's in the public domain now, whether it be (paid) Wall Street analyst reports, mainstream media, or "futureoftheunion". Automotive News is now reporting: http://www.autonews.com/news.cms?newsId=13500 There is going to be a lot of sensational reporting in the coming days and weeks. Yet what I think the situation requires is cool circumspection. Take a step back. $12/hr for line work? Wage and benefits packages of $18? Plenty of people would have you believe Delphi and Visteon were pushed out of the nest too early. That they were doomed to failure and that this is in and of itself a failure. Now I cannot sit here in 2005 and attempt to ascertain with any certainty whether this could have been envisioned in the minds of GM and Ford executives half a decade prior. 1999, 2000: very different days. Ford did have to swallow a bitter pill earlier this year with the reaquisition of underperforming plants. GM, too, is going to take a significant hit (bodyblow!) no matter how this turns out. But - again - step back for a moment. Delphi has 180,000 employees. Dozens of thousands in the US. I can think of no plausible scenario under which the wage and benefit packages of these (GM Automotove Components Group / GM Delphi Automotive Systems) employees could have been brought down to competitive levels except under the very scenario which is unfolding before our eyes.

My question is "How many more body blows can GM take?" GM paid approximately $2.4 billion for 20% of Fiat Auto and spent another $2.0 billion to cancel Fiat's put. That's $4.4 billion of cash expended for what in the end was a bit of diesel engine technology. Essentially a loss of $4.4 billion. GM paid approximately $1.4 billion for a 20% stake in Fuji Heavy Industries (maker of Subaru). It then sold 8.7% of its stake to Toyota for $315 million, implying the remainder (to be sold at market prices back to Fuji for retiring) is valued at around $408 million. This would amount to about a $677 million loss on GM's holdings, and - in fact - GM will be restating 2nd quarter results to reflect this loss to the tune of $700 to $800 million. GM in the Fall of 2003 was compelled to sell $13.5 billion in long-term bonds to plug a hole in its Pension fund. This has had the effect of reducing operating cash flow as much as $800 million per year since - and, while GM reports its fund as being fully funded, by some measurements it continues to be underfunded by tens of billions of dollars. GM's fully-funded status is dependent upon accounting which calls for an expected return on plan assets of 9% per annum (down from an improbable 10% going forward). This may need to be revised further downwards, which would necessitate another floating of long-term bonds at much higher interest cost to plug yet another hole. For comparison purposes, Berkshire Hathaway's long-term expected return on plan assets is 6.5%! Not to disparage General Motors Investment Management Corporation (hat's off to a job well done thus far), but they're no Warren Buffet. And don't even get me started on the billions and billions spent on GM Common Stock share repurchases in the $60 and $70 range. My point is, GM's core business (GMAC aside) is suffering. There are important glimmers of hope in Europe, which seems to have turned the corner. Asia-Pacific, while maybe not as hot as it was last year, is a bright spot. GM LAAM, after years of losses following previous stellar returns, is bumping along alright. GMNA is the Sword of Damocles hanging over the corporation's head. Aggregated, GM Automotive operations are suffering. Yet these exogenous shocks just keep coming! GM has used its heft and size to absorb one body blow after another. But is there a point at which this becomes more and more difficult to sustain? You have to look down the road and wonder what similar shocks are on the horizon. Clearly, Delphi comes to mind, with a combination of job bank cash buyouts / cash contribution to Delphi measured in billions, plus the assumption of pension and OPEB liabilities measured in further billions, plus potential reacquisition of under-performing plants in any potential aid package to Delphi. In the event of bankruptcy, maybe no asset reacquisition or cash assistance, but far greater amounts of pension and OPEB liability assumption. The body blows are coming in waves and are not yet finished. I have a feeling the greatest is yet to come (and soon). Perhaps this sale of Fuji Heavy stock is an indication of an impending need for a large amount of cash. Again, I just have to lament that with all the problems GM has from a current or operating perspective, that these exogenous shocks just keep knocking us down. It's hard enough as is! All of this really adds up, at least in my mind, to an indictment of the Jack Smith era. I disagreed forcefully - vehemently - with a lot of Smith's decisions (Smale, Zarella, brand management, VSSM, Fiat, Subaru, etc. - admittedly easier to do in retrospect) but had never been willing to criticize him or his "alliance" strategy too loudly because of the tremendous respect I felt he deserved for "stopping the bleeding" and perhaps even saving the company from bankruptcy in 1992/1993. I've wondered, though, if the events of recent years mean his legacy should be reevaluated. The loss on the Fuji Heavy stake is just one more reason to think so.

Agreed. Even if it proved more costly to General Motors, I would prefer at this point to see a bankruptcy filing if for no other reason than the long-term psychological effect on organised labour.

http://finance.yahoo.com/q/ecn?s=DPH

Right. My understanding is that, despite the code, cost consideration precluded GM do Brasil from adopting a wholesale iteration of the lastest Opel / Vauxhall Astra and instead a significant amount of the engineering originated from GM do Brasil and is unique to this particular product. Much development took place at the Cruz Alta GM Proving Grounds without the expected level of assistance from Adam Opel.

Almost correct. It is indeed based off the Astra, not the GM2900 Vectra nor Epsilon Vectra. However, it is not based off the new (GM3300) Astra. Instead, it's off the GM3000 (previous generation Opel-Vauxhall Astra which is still produced in Sao Caetano do Sul in Sao Paulo state). There still seems to be some confusion surrounding that point in the marketplace. When I lived in Brasil, I drove a beautiful blue 2900 Vectra equipped with a V6 engine (one of only a handful in Brasil). It was available to the public only with an I4. This was 1996-1998. The "Novo Vectra" as it was called then was something hot. It had been unveiled in Europe only months before and Hogan brought it fresh to Brasil. It sold like mad - nearly 90,000 in 1997 alone. The market has sinced changed and the Vectra has aged. Unfortunately, Brasil did not receive the updated Epsilon version due to financial difficulties, so the 2900 was allowed to whither a bit on the vine down there. It was a shame to see 86,800 units in 1997 deteriorate to only 3,759 last year. It was all the more sad to see given the newer product many of the French automakers were fielding in the Vectra's arena. So GM do Brasil was forced to do something about this. They looked at bringing the Epsilon Vectra which would make sense at 80,000 units, but it was determined to be doubtful the Vectra could regain that amount of sales in a shrinking product segment. Studies also showed the Vectra name to have a significant amount of cache with Brasilians due to its having been incredibly modern upon its 1996 debut (when the car was launched with great fanfare on an island just off the coast of Rio de Janeiro in '96, it was seen as heralding a new era in the Brasilian automotive industry in which automakers would bring their latest and greatest product immediately ashore). The decision, then, was a compromise - to field a "Vectra" sedan as much larger than the CURRENT FOR BRASIL Astra as feasible while utilizing its platform. It was a good effort. Wagoner & Lutz praised the innovative engineering-on-the-cheap earlier this year in SP. GM do Brasil is looking in many ways like Holden in their ability to field different models off existing platforms and this comes on the heels of its successful involvement in Meriva engineering & design. Alas, though, the 2900 will finally be retired. In fact, it already has been. It was a good run. H.H.

Sharp. Clean. Not a lot of surprises. Interior is more radically changed than many had suspected. Looks great from the side profile. Some of my concern re: the rear bumper from spyshots has been alleviated. All-in-all, great job.

Tahoe is out: http://www.newstream.com/home.aspx?story=30938

Speaking of teasers I think everyone in the world has seen this by now, but on page seven of September's "GM Edge" there's an OUTLOOK teaser pictured above the finalized production "SKY" and "AURA". Get used to capitalized letters :)