DETROIT -- Delphi Corp. CEO Steve Miller wants to avoid filing for Chapter 11 bankruptcy protection. But, he says, the company has prepared for the possibility by managing its cash and bringing in top talent from the corporate restructuring industry.
A week after he joined Delphi in June, Miller hired Skadden, Arps, Slate, Meagher & Flom LLP, a Chicago bankruptcy and corporate consulting firm that represented Kmart Corp. during its Chapter 11 bankruptcy protection case in 2002 and 2003.
Jack Butler, a Skadden, Arps partner who was lead counsel to Kmart, is working with Delphi, Miller said in an interview last week at the company's Troy, Mich., headquarters.
Butler is advising Delphi on its strategic options to avoid a Chapter 11 filing or go in from a position of strength, Miller said.
Delphi also is conserving cash to make sure the company has enough financial flexibility in Chapter 11 proceedings, Miller said. The supplier has drawn down $1.5 billion of a $1.8 billion revolving loan, he said. The money has been put on deposit where it will be available for operations, Miller said.
Miller said he would prefer to avoid a Chapter 11 filing by negotiating an out-of-court settlement with General Motors and the UAW. But Delphi is prepared to operate in bankruptcy without interrupting parts shipments to customers or causing hardship among its own 2,000 U.S. vendors.
Delphi would seek Chapter 11 protection only for its U.S. operations, which are generating most of the company's losses.
Customers and vendors need not fear that a Delphi bankruptcy would be chaotic, like that of Collins & Aikman Corp., Miller said.
When Collins & Aikman, one of the largest global interior component suppliers, sought Chapter 11 bankruptcy protection in May, it was in such financial straits that customers had to lend the company money to keep it operating.
Miller has spent the third quarter trying to negotiate a settlement with GM and the UAW that would reduce Delphi's bloated wage-and-benefit package that averages $65 an hour for unionized employees.
Next quarter, he said, he will focus on restructuring Delphi's plants to determine what products to shed.
Delphi's Automotive Holdings Group, a collection of 11 unprofitable plants in North America, was responsible for operating losses last year of $590 million.
Those operations generated $2.6 billion of Delphi's global automotive parts revenue in 2004. Delphi ranks No. 2 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $24.1 billion in 2004.
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