Delphi files for bankruptcy

updated 8:50 p.m. ET Oct. 9, 2005

DETROIT - Delphi Corp., the nation’s largest auto supplier, filed for bankruptcy Saturday, sending shock waves through a U.S. auto industry already weakened by high labor costs and falling market share.

Delphi’s bankruptcy, which is expected to result in plant closures and layoffs, is one of the largest in U.S. history. The company has 50,000 U.S. employees.

The company filed to reorganize its U.S. operations in federal bankruptcy court in New York, where a judge Saturday allowed Delphi to continue operating while more hearings were scheduled. Delphi’s non-U.S. operations were not included in the filing.

Delphi Chairman and CEO Robert S. Miller said the company hopes to emerge from Chapter 11 in early to mid-2007.

“We will make every effort to make this as quick as possible,” Miller told The Associated Press on Saturday.

Miller said Delphi will continue to pay its employees and suppliers and will ship its products on schedule, although the company’s former parent, General Motors Corp., said the filing could cause supply problems.

“We are not going to adversely affect our customers,” Miller said. “Our people will get their paychecks and will still have their health benefits. Retirees will continue to get their checks. Any changes to that will be dealt with in an orderly way.”

Miller, a restructuring expert who was hired in July, had threatened to take the company into bankruptcy if he failed to reach a restructuring agreement with GM and its largest union, the United Auto Workers. Miller set a deadline of Oct. 17, when U.S. bankruptcy laws are scheduled to change.

Miller said Delphi will continue negotiating with GM and the UAW to lower its labor costs; wages for many Delphi workers are set by the company’s spinoff agreement with GM. Miller said the three parties agreed to continue their discussions after a bankruptcy filing.

“We mutually concluded there was still too much of the complex work yet to be done,” Miller said. “It was not going to be efficient to work right up to the midnight deadline to the change in the law.”

UAW officials blasted Delphi’s decision to file for bankruptcy one day after sweetening the severance packages of 21 top executives to help persuade them to stay at the company.

“Once again, we see the disgusting spectacle of the people at the top taking care of themselves at the same time they are demanding extraordinary sacrifices from their hourly workers, engineers, administrative and support staff, midlevel managers and others,” union leaders said in a statement.

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