By Chrissie Thompson, Automotive News (a Crain publication)
Troy, Michigan -- Delphi Corp. posted a $534 million operating loss for the first quarter and warned North American vehicle production cuts may force it to liquidate.
North America's second-biggest automotive supplier, mired in bankruptcy since Oct 2005, said its next two quarterly reports may show the impact of "dramatically lower production" from extended shutdowns at Chrysler llc and former parent General Motors. Delphi's sales revenue in the first three months of the year plunged by more than half.
Chrysler ceased North American production last week after filing for bankruptcy on 30 April. GM, whose bankruptcy is growing more probable, plans to shut 13 assembly plants for up to nine weeks beginning this month.
Because of the lower production, Delphi said it can't guarantee it will maintain access to existing financing, get new financing or stay compliant with terms of its bankruptcy financing.
"We may need to sharply curtail operations, including the temporary or permanent shutdown of one or more operations in North America, to remain in compliance," Delphi said.
"If we cannot remain in compliance, even with such actions, our lenders under the amended and restated debtor-in-possession credit facility may seek to foreclose upon substantially all of our assets and proceed toward a sale or liquidation."
Delphi posted a $552 million net profit in the first quarter after drawing more than $1140 million in benefits from continued restructuring activities. The supplier had a $589 million net loss in the same period last year.
The gains from restructuring stemmed mostly from savings that followed the elimination of salaried retirees' health care and life insurance benefits as part of Delphi's Chapter 11 reorganisation.
The Troy-based supplier had arranged financing to emerge from bankruptcy in April 2008, but those plans collapsed when New York financier Appaloosa Management LP pulled out of the deal on closing day. Last week, the US Bankruptcy Court extended to 2 June the use of bankruptcy financing before Delphi must reach a new agreement with its lenders.
Last month, GM said its former parts unit was unlikely to emerge from Chapter 11 reorganisation any time soon without government help - and may not exit at all.
Delphi's sales for the first quarter fell to $2530 million from $5250 million in the first three months of 2008. GM accounted for 29 percent of Delphi's first-quarter sales, down from 31 percent a year earlier.