Daniel Howes' Blog

Four years on, the vanguard of Detroit Auto bankruptcies emerges

Delphi Corp. filed for Chapter 11 bankruptcy four years ago today, shaking the foundations of the Detroit auto industry. Former parent General Motors Corp. changed; the United Auto Workers couldn't fight the change; Delphi shrank -- plants, people, business lines -- to less than half its size; and legions of Delphi hands, especially its salaried employees and retirees, began a long, painful journey that would culminate in them preparing to say goodbye to roughly two-thirds of their expected pensions.

This week, Delphi is out of bankruptcy. It's renamed as Delphi Holdings LLC, is privately held and is little more than a headquarters in its home country. Yes, Delphi is American inasmuch as a Swiss bank with major operations in London and New York can credibly be called a Swiss company.

What did we learn from the sordid, painful and contentious exercise? That departing Chairman Steve Miller, the serial bankruptcy guy, was right: Delphi's C11 was the warm-up act for the industry's mother of all bankruptcies (and its stepchild), the BKs of GM and Chrysler.

Second, that GM really did set Delphi up to fail when it spun the former parts unit off in 1999 with its own board, GM alums-turned-Delphi execs, and a business plan that essentially wouldn't allow Delphi to distance itself from GM's North American business or its ridiculously uncompetitive labor agreements.

Third, that UAW master agreements subjected to the detailed scrutiny of bankruptcy proceedings, open court and comparison to industry standards can be proven to be as uncompetitive as the unions critics had long insisted they were. No matter how many times UAW President Ron Gettelfinger called Delphi execs "pigs slopping at the trough" or personally denigrated (by name and in public) execs who he said didn't earn their pay, the facts were clear: GM, the UAW and, yes, Delphi were complicit in perpetuating an unsustainable labor cost model that helped push Delphi over the edge.

Fourth, that publicly saying Delphi can't afford to pay a guy $75 an hour (in wages and benefits), as Miller did early in the bankruptcy, may be directionally correct. But it's ill-advised and needlessly provocative, akin to former Defense Secretary Donald Rumsfeld's cheap shot about "Old Europe" being unable to defend itself. Arguably true, but better said behind closed doors.

Fifth, that there's still value in Delphi. However many plants it closed or businesses it sold, the slimmed down supplier operated business-as-usual outside the United States; never missed a shipment inside the United States; and, over the course of the four-year bankruptcy, managed to book nearly $90 billion in new business contracts, CEO Rodney O'Neal told The News today. That's hardly evidence of a worthless company unable to compete or deliver value to its owners, now a consortium of banks.

Finally, Detroit still matters at the intersection of national politics and the economy. So do its political connections, especially those of the UAW, to a Democratic Party with one of its own as president. End of the day, it was BHO's auto task force and, more broadly, his Treasury Department that forced GM into bankruptcy, forced all parties to finally finish a Delphi, and forced Delphi to cast the pension of its active and retired salaried folks onto the Pension Benefit Guaranty Corp.

Four years ago, The News's banner headline on its Delphi bankruptcy package was two simple words: "Staggering blow," it read. We were right.