DETROIT -- Now that Delphi Corp. has restated its earnings as part of an internal accounting scandal, the company's new management team must turn its attention to other pressing problems.
Those problems include:
The accounting scandal already has forced a wave of executive resignations. But Delphi's labor costs and dependence on GM pose greater long-term financial threats.
Last week, Delphi restated its earnings for previous years and posted a $4.75 billion loss for 2004. The loss reflected Delphi's write-off of deferred tax credits.
Now that Delphi has restated earnings, turnaround specialist Steve Miller can focus on Delphi's long-term problems. Last month Miller replaced Delphi CEO J.T. Battenberg III, who retired on Friday, July 1.
Miller has had considerable experience guiding companies in crisis. He played a key role in bailing out Chrysler Corp. in 1980 and ran Federal-Mogul Corp. and Bethlehem Steel Co. But Delphi does not entirely control its fate.
"They're going to need some outside help from the unions or GM to stabilize the financial performance of the company," said Martin King, analyst for Standard & Poor's, the New York credit rating agency.
"I don't think there's a whole lot left they can do internally. They're just saddled with a number of unprofitable businesses and a large customer who's shrinking."
Delphi faces obligations to meet its pension fund contributions, King noted. Delphi has a $1.1 billion pension contribution due in June. In addition, a $500 million bond matures in May.
"Those are very large checks they have to write," King said. "They're going to have to borrow to do that."
King noted other factors that are beyond Delphi's control: rising raw-material prices and shifting consumer preferences. If sales of big
SUVs continue to decline, Delphi's fortunes could worsen.
"Growth around the world has slowed, and the deterioration of their business here in North America has accelerated," said King. "It's way out of balance at this point."
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