By Eric DuVall
At the end of March, Delphi identified its most important products, the ones it thought would carry the business out of bankruptcy.
Lockport’s products were on the list.
The company also identified what plants needed “transitioning” to become profitable, and thus sustainable.
Lockport was on that list too.
Since filing for bankruptcy court protection a year ago, Delphi Corporate has undergone significant changes. Those changes have filtered down to the plant on Upper Mountain Road as well. A pre-bankruptcy workforce of 3,800 has dwindled to around 2,000, several hundred of which are temporary employees.
Some 1,300 UAW Local 686 members have signed up to leave the plant through a series of retirement incentives, buyout and transfer options presented to workers.
And yet, a year into bankruptcy, the issue still isn’t ersolved. Court hearings on the matter have been continually delayed. That isn’t necessarily a bad thing, according to bankruptcy expert Sam Tiras, a SUNY Buffalo professor.
“I figured they’d move faster on their reorganization,” Tiras said. “The problems have been clear right from the start. I commend them for moving so slow. They see where they need to go, but they’re trying to get the employees’ backing on it.”
Williams said the company maintains, as it has since the beginning of negotiations, that an agreed-upon settlement is preferable to one imposed by a judge.
“We have stated publicly for some time it is our goal to reach a consensual resolution,” he said. “Part of the adjoining process is to focus solely on negotiations rather than litigation. We want to work through that. We have had some progress, but we have some hurdles to cross.”
What are the odds?
Companies declare bankruptcy for four general reasons, Tiras said. His research has shown the least successful fall into one of two categories. The first is those who are in a slow enough decline that bankruptcy doesn’t force them to restructure enough to fix their long-term issues. The second generally unsuccessful company uses bankruptcy as a simple means to hold off creditors. A backlog of debt is erased, but simply erasing past debts doesn’t guarantee avoiding future ones, he said.
Successful companies generally fall into two categories. The first are the ones who are so far in debt they are forced to address problems immediately. A second group can have the opposite problem — a short-term cash flow, but structural problems.
Delphi, Tiras said, is a mixture of the two latter issues. The company had amassed a large short-term debt, but had long-term structural issues, as well.
Ironically, he said, sometimes the worse the picture pre-filing, the better the odds of re-emerging a successful company of one sort or another.
No matter the problems, Tiras said one message is clear.
“(The lesson of) the failures when they didn’t emerge is tackle your problems early,” he said. “Use bankruptcy as a means to resolve your problems, not just hold off creditors. When you do that, you’re not fixing the problem. Whatever caused you to build up your debt in the first place, it’s going to happen again.”
Overall, companies have the bankruptcy odds in their favor. Between 80 and 90 percent of companies re-emerge in one form or another. The average time spent in bankruptcy is three years, he said.
Where is Delphi going?
Frequently, when a company exits bankruptcy protection, they don’t much resemble their former operation, according to Tiras.
“Most re-emerge,” he said “The question is, what do they re-emerge as.”
Despite what appears to be a genuine effort to get union workers behind the restructuring, Tiras said the recent bankruptcy history doesn’t bode well for unions. The most recent example is Continental Airlines, which Tiras said declared bankruptcy, “specifically to break their unions.”
“I give (Delphi) credit,” he said. “Most of the companies have jumped at it, followed the Continental trend. They (Delphi leaders) are much more in tune with the employees in the long run. I know the unions are worried but that’s why they’re moving so slow.”
Local union leaders, however, aren’t sharing that perspective. Paul Siejak, president of UAW Local 686 Unit 1, said he’s fed up with the company’s “disgusting abuse of U.S. bankruptcy laws.”
He recalls the company’s filing brought a sense of dread.
“No one here at UAW Local 686 celebrated the event, that’s for sure,” he said.
Siejak points to the company specifically filing its North American operations for bankruptcy, leaving out its worldwide operations, which he said were still profitable.
“It’s a worldwide company, but a U.S. bankruptcy only,” he said. “For the government to allow them to use these bankruptcy laws, they’re (also) responsible. The whole thing is just sad.”
Weaning off GM
If there’s one thing experts, union officials and Delphi leaders agree on, it’s that a continued reliance on General Motors as the company’s single largest customer is a good thing.
Williams, the Delphi spokesman, said the company has been successful in doing that. Before filing for bankruptcy, the company announced that, for the first time, less than half of Delphi’s business was generated by its former parent company.
New contracts with non-GM clients have been signed, he said. It has recently announced component sales contracts with Harley Davidson, Saturn, Ford and Ferrari.
Delphi has also sought court approval to void some sales contracts with GM. The contracts guarantee pricing that Williams said guarantees it will sell the parts at a loss.
“(The) motion seeking cancellation of GM contracts had to do with several contracts we had with GM that are in a loss position for us,” he said. “The goal was to further diversify. We’ve done that and we continue to do that. Obviously it has been good for us.”
While companywide, GM sales are being replaced by other customers, Lockport lags behind. Williams said the large majority of the plant’s sales are still made to GM.
Part of the problem, he said, is that the Lockport Thermal plant is still not able to “competitively quote” low prices for prospective customers.
“We haven’t been able to competitively quote for new business,” he said. “We have to be able to do that with a new cost structure.”
Siejak agreed that finding new customers is key to the plant remaining open and becoming profitable.
“The real thing is about the business, not being tied to one dedicated customer,” he said. “Other customers besides GM, that’s the only way we’ll be able to actually grow.”
Contact Eric DuVall at 282-2311, Ext. 2251.
By Eric DuVall
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Passed unexpectedly in Niagara Falls, NY. Family will receive friends Monday 11 AM. Memorial services at Noon, Bethany Baptist Church, Forest Ave. at 20th Street. Arrangements by WILLIAMSON FUNERAL HOME.
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