Cash stash at Delphi is solid, court told
5/25/2006NEW YORK - Lawyers for Delphi Corp.'s labor unions and stakeholders insisted yesterday that the auto parts supplier has a bigger financial cushion than company officials acknowledge.
Glenn Kurtz, a lawyer for Delphi equity holders, said at a hearing in U.S. Bankruptcy Court that the supplier's financial results are running ahead of expectations.
Delphi, of Troy, Mich., which has 33,000 hourly workers, most represented by the United Auto Workers, has asked Judge Robert Drain to permit it to void the company's union labor contracts. The company's operations include plants in Sandusky and in Adrian, Mich.
Hearings on the request resumed yesterday after a week-and-a-half hiatus; a ruling isn't expected until late June at the earliest.
General Motors Corp., Delphi's former parent company, had asked the bankruptcy judge to postpone the hearing on Delphi's request for permission to void its contracts, but the hearing moved forward.
GM had said a postponement would have allowed more time to avert a disruptive strike at Delphi, which annually sells about $14 billion in car and truck components to the automaker.
Any closures could force GM to burn through billions of dollars in cash, according to analysts. A 1998 strike at Delphi essentially halted GM's North American operations for nearly two months.
GM executives have said resolving labor issues with Delphi is an urgent priority for the automaker.
Some 24,000 Delphi workers represented by United Auto Workers union voted overwhelmingly this month to authorize union leaders to call a strike if the parts maker canceled their labor contracts.
John Sheehan, Delphi's chief restructuring officer, was under pressure on the stand to say whether Delphi ever intends to unilaterally impose new, lower wages if talks among the supplier, its unions, and GM fail.
Mr. Sheehanemphasized that the company prefers a consensual agreement.
"If we get to a point in time in the future where the company can find no solution where its liquidity is evaporating or is being used up, we'd have to consider drastic circumstances," he said. "We hope not to get to those days."
Lawyers for Delphi's unions insisted that those days are further away than Delphi says.
Delphi, which filed for bankruptcy protection in October, lost $313 million in the first quarter of 2006, according to preliminary figures from the company.
Mr. Sheehan said Delphi has about $3.6 billion available : $1.9 billion in cash and $1.7 billion in bank credit.
Delphi's pension plan is underfunded by about $4 billion, Mr. Sheehan said, but the company, whose unions represent about 12,000 retirees, doesn't intend to cancel its pensions.
Talks with the government are ongoing to determine whether Delphi will be able to obtain legislative exemptions for those pension payments, Mr. Sheehan said.