Delphi, GM trade barbs on resolution of bankruptcy issues; 'uncontrolled shutdown' feared

By Caroline Salls

Pittsburgh, April 23 - General Motors Corp. said Delphi Corp. or its lenders could force the automaker into "an uncontrolled shutdown, with severe negative consequences for the U.S. automotive industry" if the two sides cannot resolve issues related to Delphi's bankruptcy, according to a GM news release.

Delphi also issued a news release Thursday in which it mirrored GM's views that continued supply to the automaker can be best achieved by the resolution of issues that will allow Delphi to emerge from Chapter 11 bankruptcy.

According to the GM release, the troubled automaker has been actively engaged with Delphi management and the various constituencies involved in its bankruptcy case for almost four years.

More recently, in light of adverse developments in the industry, GM said it has been in negotiations with Delphi and its lenders to arrive at solutions that would ensure GM's source of supply under reasonable terms.

In fact, GM said it has proposed a potential solution that "would allow for the successful and rapid resolution of Delphi's bankruptcy case," but Delphi's lenders rejected this proposal.

According to the Delphi release, each of the parties have provided proposals for a potential solution that it believed would allow for the quick resolution of Delphi's bankruptcy case.

Delphi said it remains confident and is working with all of its stakeholders to resolve the issues.

In addition, the supplier said it "values all of its customers and has provided them, including GM, with uninterrupted supply throughout Delphi's Chapter 11 cases."

GM said it is scheduling multiple down weeks at 13 assembly operations in North America, and roughly 190,000 vehicles will be removed from its North American production schedule in the second and early third quarter of this year.

The automaker said this scheduled downtime stems partially from possible production implications related to "the complicated and difficult negotiations with Delphi and its debtor-in-possession lenders."

GM said the downtime can also be attributed to high levels of dealer vehicle inventories given the current depressed market. GM said the shutdown will also give it an opportunity to bring production in line with current market demand.

"We're taking aggressive steps to accelerate our inventory initiatives that have worked well since the first of the year," GM North America president Troy Clarke said in the GM release.

"While sales have been performing at or close to our plan estimates, and dealer inventories have been reduced accordingly, we want to more closely align inventories with even more conservative market assumptions.

"By reducing our inventories even more aggressively we reduce pressure on GM and our dealers, and set ourselves up well for a clean 2010 model year start-up."

GM said its Total Confidence program, federal programs to make credit more available and proposals to provide additional consumer incentives via tax credits or scrappage programs could rekindle additional market demand in the months ahead.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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