10 October 2005

Not good

Auto parts supplier Delphi Corp became the largest auto firm in US history to declare bankruptcy when it announced it was seeking Chapter 11 protection for its US divisions.

While Delphi and its former parent company, General Motors, insisted that there would be no supply interruptions, the move is certain to reverberate across the industry.

[. . .]

This is not good from where I sit. Even though I bitch about Delphi's (and GM's) quality and their downhill spiral since 1973, this opens the door for even less dependable manufacturers. I'm of the 'Better The Devil You Know' school. Not only that, but GM talks bullshit when they say there'll be no interruptions.

[. . .]

Delphi may be the largest, but it is not the first US supplier to seek bankruptcy protection as a result of stiff competition from abroad and shrinking demand for American cars.

It employs some 185,000 workers, including 35,000 in the United States. [Link]

[. . .]

You know there will be layoffs, and while current year manufacture might not be affected. God help them if they have to retool a part thanks to recall. I remember in '92 (not long after Ford bought control of Mazda) the Probes of that year (built by Mazda) had a bad run of vehicle speed sensors. They started going bad a couple months in (December '91 -January '92) and the recall began shortly after. Some cars were inoperative for months until capacity could catch up with demand.

Also something to ponder, the American taxpayer will probably have to pick up the tab for Delphi's pension commitment.

[. . .]

Delphi, which lost $4.8 billion last year, said that the Pension Benefit Guaranty Corp. (PBGC) could take over the company's pension obligations, but the federal agency might not guarantee the full amount. For a retiree under age 65, the maximum benefit is $1,710.51 per month or $20,526.12 per year, an amount lower than the typical payout to Delphi workers.

[. . .]

This could be the beginning of the end of GM. Look for Buick and Pontiac to go the way of the Oldsmobile shortly, probably within 5 years.

No comments: