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Miller says Delphi can no longer afford jobs banks, some plants
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Delphi Corp. CEO Steve Miller pauses during an interview at the company's headquarters in Troy. Miller discussed his options for restoring the auto supplier's financial health during the interview. Analysts say it's likely Delphi will reach a compromise with former parent General Motors Corp. and the United Auto Workers that will help it avoid bankruptcy.
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TROY -- Delphi Corp. employees should expect plant closings and the end of jobs banks -- which pay laid-off workers their full wages and benefits -- as the auto supplier reorganizes, Chairman and CEO Steve Miller said Friday. He said he will decide whether white-collar layoffs are needed by the end of this year.
"The fact is, we are out of money," Miller told The Associated Press. The company lost nearly $750 million in the first half of this year.
Delphi is in the midst of restructuring talks with its former parent and largest customer, General Motors Corp., and the United Auto Workers union. If those talks fail, Miller has said Delphi could file for bankruptcy before Oct. 17, when the nation's bankruptcy laws get stricter.
Analysts increasingly believe that the parties will reach a resolution without bankruptcy. On Friday, Delphi shares rose after Merrill Lynch analyst John Casesa raised his rating of Delphi from neutral to buy, saying it's likely GM and the UAW will reach terms with Delphi because a bankruptcy would be too costly.
Delphi shares were up 34 cents, or nearly 11 percent, to close at $3.46 on the New York Stock Exchange. They have been trading in a 52-week range of $2.68 to $9.63.
In a note to investors, Casesa said GM could be liable for between $4.4 billion and $6.7 billion worth of pension and health care benefits for Delphi employees if the supplier goes bankrupt. If GM fails to help Delphi, it could damage the automaker's relationship with the UAW, Casesa added, hurting GM's own efforts to get concessions from the UAW in health care and pension costs.
Miller said GM and the UAW recognize the gravity of Delphi's situation, but he wouldn't go into details about their discussions. He reiterated that Delphi won't declare bankruptcy if it has a firm restructuring agreement from GM and the UAW before Oct. 17.
"We will have a very serious judgment to make as we get closer to Oct. 17," he said.
Miller stressed that he doesn't want to take the company into bankruptcy, a difficult process he estimates would take at least one year. Miller has guided several companies through bankruptcy, including Bethlehem Steel and Morrison Knudson Corp.
"Everyone knows it's a very unpleasant way to resolve your problems. It's expensive, it's time-consuming, there are limitations on your freedom to act quickly and do things, and the reputational damage to your business can drive away some of your customer base and your revenue base," Miller said. "Nobody ever wants to go there, unless you have to."
Detroit-based GM spun off Delphi in 1999 but still accounts for half its business. The world's largest automaker bought $14 billion in parts last year from Delphi, which is based in nearby Troy.
Delphi has 25,000 UAW-represented workers who make GM wages of $27 an hour. By comparison, hourly workers at rival supplier Visteon Corp. will make an average of $17 per hour once Visteon completes a restructuring plan with former parent Ford Motor Co.
Miller wouldn't say how many plants Delphi might close, but he said some plants couldn't operate profitably even if the workers were making average wages.
He said Delphi currently spends $400 million a year on its jobs banks, which the company can no longer afford. Miller also said he will begin considering cuts to Delphi's white-collar work force in the fourth quarter, although he said Delphi's salaried staff already is lean.
UAW President Ron Gettelfinger has said that executives should consider their own salaries before asking the union for concessions. Miller received a $3 million signing bonus and a minimum annual salary of $1.5 million when he was hired in July.
Miller said his compensation is fair since he came out of retirement and left positions on several corporate boards in order to take the Delphi job. But he said he is sensitive to the criticism. When he left Bethlehem Steel, he said, he turned down a bonus because the bankruptcy had left the company unable to guarantee retirees their promised pensions.
"Ultimately, we want to honor all of the accrued benefit rights that all of our employees have," Miller said.
------ On the Net: Delphi Corp.: http://www.delphi.com
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