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The eBearing News
October 11, 2005
Delphi Bankruptcy
Hits Bearing Manufacturers
copyright © 2005 eBearing Inc.
The recent Chapter 11 bankruptcy filing by Delphi Corporation (USA; NYSE:DPH) has also hit the
U.S. bearing industry by putting payments on hold to Delphi's key bearing vendors.
Delphi and 38 of its U.S. domestic subsidiaries filed for Chapter 11 bankruptcy protection
on October 8, 2005, in the Southern District of New York, "in order to preserve the value
of the company and complete its transformation
plan designed to resolve Delphi's existing legacy issues and the resulting high cost of U.S. operations."
Direct link to all Delphi bankruptcy court documents
One industry executive told eBearing, "Steve Miller has done it to us again," referring to
Delphi's recently-installed turnaround CEO being the same Steve Miller who put Federal-Mogul
into Chapter 11 bankruptcy in October 2001, involving a number of bearing vendors who still have
not been paid. The earliest projections for F-M exiting bankruptcy are
mid-2006, and even then creditors will be paid in equity, not cash.
2001 article: F-M bankruptcy hits bearing makers hardest of all
Filing Chapter 11 bankruptcy forces a company, by law, to not pay for goods or services
received before the filing date. In essence, supplier payments are put on hold
while the company plans, and hopefully executes, a successful reorganization and new operating strategy.
Payment for goods ordered and received after it files Chapter 11 are processed normally.
But in the meantime, debts sit unpaid, and with auto industry suppliers already operating
on razor-thin margins, the impact on individual companies can be severe.
Of the Delphi bankruptcy, Mr. Miller insisted the business will continue to operate
so suppliers can continue to do business, and possibly make up for the lost payments.
He said, "We're well financed, well planned and well organized."
Delphi -- the world's second-largest auto parts supplier behind Bosch -- was spun off
from General Motors in 1999, and has 167 plants worldwide,
employing more than 185,000 workers. The company had 2004 sales of $28.6 billion, and
lost $4.6 billion. Last quarter, it lost $338 million. More than $14 billion of Delphi sales
come from General Motors, but in
its court filings, GM claims it knowingly overpays $2 billion a year for the parts it
buys from Delphi.
Delphi relies on approximately 3,500 suppliers; the company declined to provide the names
of its specific bearing industry vendors.
Court records show the following companies among Delphi's top creditors:
- Timken Company: $3,619,957
- Applied Industrial Technologies,
King Bearing,
American Bearing & Power Transmission,
Bruening Bearing,
and Detroit Ball Bearing: $not listed
- Motion Industries Inc. $not listed
Court records show Delphi's "Top 200" creditors list includes:
(no specific dollar amounts shown)
- The Timken Company
- The Torrington Company
- Hoover Precision Products
- INA USA Corp.
- Koyo Corp of USA
- Meadville Forge
One potential "out" is a Bridge Order allowed by the court, "Financially Distressed Sole Source
Supplier and Vendors Without Contracts," prior to 10/8/2005.
That agreement says Delphi is, "authorized but not directed in the reasonable exercise
of their business judgment, to pay all, a portion, or none of the pre petition claims
(the "Essential Supplier Claims") owing to certain of the Debtors' suppliers that are essential
to the uninterrupted functioning of the Debtors' business operation, up to an aggregate
of $45 million."
However, bankruptcy specialists tell eBearing that clause is not likely to be used for any
bearing vendor, first because bearings are normally considered interchangeable commodities,
and second because amounts due to the bearing vendors do not appear large enough to
put any of them at risk of closing if they are not paid soon.
In its letter to vendors, Delphi warned it will become a smaller company,
"As part of our transformation plan, we will need to
realign our global product portfolio and manufacturing footprint to preserve our core businesses.
This will require a substantial segment of our U.S. manufacturing operations to be divested,
consolidated, or wound-down through the chapter 11 process."
Of those 167 plants worldwide, Delphi's only remaining bearing manufacturing facility is an important
wheel bearing hub unit plant in Sandusky, Ohio. Sandusky, part of the Chassis Systems
group, employs approximately 1,100 hourly and salary workers, producing wheel bearing units
for most of GM's high-volume vehicles.
The Sandusky plant, according to most sources, is profitable and has never been mentioned as a
target for sale or disposal. However, it has been through several rounds of layoffs and employment
now stands at just over half what it had been at its peak in the late 1980's. The plant
has been GM and Delphi's only hub unit manufacturing facility since 1978, and ran at full
capacity for several years in the 1980's and early 1990's.
Today, the Sandusky plant produces not only wheel bearing hub units, but also lightweight
water pumps, low-friction rocker arms and several other precision reciprocating parts.
Officially, Delphi said it must aggressively review every aspect of its business, and promises
no commitments to any of its own plants or any of the suppliers in its network.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
trademarks of eBearing Inc.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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