DETROIT - Delphi Corp. will shut down its generators business likely by mid-year if it can't work out a sale to Delco Remy International Inc.
The deal may hinge on a settlement with the UAW. Delphi and the union are discussing contract concerns, including how many workers might transfer to Delco Remy with a sale.
With such divestitures, employees could retire or transfer to other openings, and Delphi also could end up doing contract production for a buyer, says Delphi CFO Alan Dawes.
The $500 million money-losing generators business employs 1,700 people, including 1,400 hourly workers. Delphi would not disclose how many are represented by the UAW. The affected UAW workers are assigned to plants in Anderson, Ind., and Flint, Mich., which also make other products for Delphi.
Delphi and Delco Remy have been negotiating exclusively since December, when a letter of intent was announced. Delphi had aimed to complete the deal by the end of 2001 and then by the end of the first quarter.
The end of June seems to be the new goal.
"If we can't conclude (the deal), quite frankly, in the relative near term, hopefully the second quarter, we would just wind the business down," Dawes said. "Our leadership team is getting impatient to make something happen here."
Delphi, which took a $125 million after-tax writedown of the business during the fourth quarter of 2001, booked another $24 million in after-tax charges during the first quarter to cover possible job reductions in the generators unit.
The company took a total first-quarter after-tax charge of $174 million to cover restructuring actions, including the elimination of 6,100 hourly and salaried jobs at 25-plus sites in the United States and Europe. Delphi completed 3,300 of the cuts during the first quarter.
Including job cuts announced in 2001, Delphi will have eliminated 17,540 positions when the newest actions are completed by March 2003.
Delphi narrowed its loss in the first quarter to $51 million, an improvement from a loss of $429 million in the first quarter of 2001, when another large charge was booked.
Excluding charges, Delphi earned $123 million in the first quarter of 2002, slightly beating market forecasts.