Published: June 02, 2009 01:32 am      

DELPHI: GM files for Chapter 11 as Delphi says it's emerging

BUYBACK: Lockport plant will be repurchased

On the same day former parent General Motors filed for Chapter 11 bankruptcy, Delphi Corp. announced Monday it has come to an agreement that will allow the company to emerge from Chapter 11. What that means for Lockport is the Upper Mountain Road plant will be bought by GM.

Delphi will emerge through a sale of assets to Parnassus Holdings, an affiliate of Platinum Equity, as well as through a sale of its global steering business and five U.S. plants to GM. Aside from Lockport’s Thermal Systems facility, GM will also buy back Delphi Saginaw Steering in Saginaw, Mich.; Delphi Powertrain Systems facilities in Rochester and Grand Rapids, Mich.; and Delphi Electronics and Safety in Kokomo, Ind.

Monday’s agreement is similar to the previous agreement, which had been terminated in April 2008 when a group of investors pulled out of the deal. Filing for bankruptcy in 2005, Delphi was ready to emerge last year, before the group of investors pulled its $2.55 billion in financing. Delphi has survived mostly from financing from GM in the amount of about $11 billion.

“After an extended period of complex and challenging discussions with a wide range of stakeholders, we are confident that these modifications to our confirmed plan of reorganization will provide a resolution that will allow Delphi to emerge from Chapter 11,” said Rodney O’Neal, Delphi CEO and president, in a statement.

Delphi spokeswoman Claudia Piccinin said there is no date set when GM would take over the Lockport plant. That would take place when the agreement to emerge from bankruptcy is approved. The agreement’s final approval hearing is set for July 23.

Piccinin said the company believes it can successfully emerge from bankruptcy on time with the agreement in place.

“With the filling, we feel this best sets us up for emergence,” she said.

The repurchase of Delphi Thermal Systems could be a good thing, said Nallan Suresh, a professor and chairman of the operations management and strategy department at the University at Buffalo. Delphi spun off from GM in 1999; at the time, the rationale was that a smaller business could be more flexible and prosper, Suresh said. But with that strategy failing, rejoining GM could bring one huge benefit to the Upper Mountain Road facility.

“Being stable for the long term,” Suresh said. “It’s a good sign for the local economy.”

Suresh said he doesn’t expect GM to be in bankruptcy for long, possibly about three months or so. A bankruptcy on the scale of what GM is in would normally take much longer. But with the pressure the government and the public is placing on the company, the restructuring of GM should move rapidly, Suresh said.

“And that’s a good sign,” he said.

The $3.6 billion needed to lift Delphi out of bankruptcy will come from a variety of sources including GM and Parnassus. GM will provide $250 million of pre-emergence liquidity for Delphi through July 31.

Contact reporter Joe Olenick at 439-9222, ext. 6241.