NEW YORK -- Delphi Corp.'s massive bankruptcy signals the beginning of the end of traditional ways of doing business in Detroit.
It poses an immediate threat, too. Any cutoff of the flow of parts to the North American auto industry could hasten the demise of many suppliers and even threaten Delphi's largest customer and former parent, General Motors.
Delphi maneuvered last week to make sure that doesn't happen. In the short run, Delphi continues to make and ship parts, and its 2,000 U.S. suppliers kept shipping during the crucial first week of the largest bankruptcy case in automotive history.
But automakers, suppliers, and auto workers are bracing themselves. For starters, hourly workers will see their numbers and their pay slashed dramatically before Delphi gets out of court.
"All I've done here is blow the whistle and say let's face it," Delphi CEO Steve Miller told the media Wednesday, Oct. 12. "Let's now deal with it: hard issues, hard choices. Life is going to be different."
Delphi's Chapter 11 filing here on Oct. 8 staggered much of the auto industry, presenting a new round of threats to GM, the UAW and just about any community or company doing business with the nation's largest auto supplier.
"If we do this (reorganization) right, Delphi will remain one of the world's leading global automotive suppliers," Miller said during his Oct. 12 press conference at the company's Troy, Mich., headquarters.
"If we do it badly, Delphi may be broken up into small pieces, and America will have lost some of its precious industrial treasures. I am absolutely determined not to let that happen."
During the first week of Delphi's bankruptcy protection case, the company went to extraordinary lengths to prevent its financially distressed and potential "rogue" vendors from creating production problems. These vendors could threaten to withhold parts shipments unless they are paid in full for parts delivered before the Chapter 11 filing.
The stability of Delphi's supply chain is crucial to the industry, particularly to GM.
GM relies on Delphi, its former parts unit, for about $14 billion, or 16.3 percent, of GM's total global annual component buy of $86 billion. If even one sole-source Delphi vendor withheld parts, that could shut some Delphi production in as little as 24 hours and quickly begin to shut automaker assembly plants.
A 54-day strike in 1998 by a GM stamping operation in Flint, Mich., shut virtually all GM assembly plants in North America. That strike cost GM about $2.5 billion, including lost production of about 225,000 vehicles.
GM is taking Delphi at its word that it plans business-as-usual in producing parts for GM and other customers, said GM spokesman Jerry Dubrowski.
"We have no reason for concern at this point," he said.
At the request of Delphi, U.S. Bankruptcy Court Judge Robert Drain gave permission for Delphi to pay up to $90 million to "essential suppliers" for parts they delivered before the company put its U.S. operations in Chapter 11. Delphi's nondomestic holdings are operating outside bankruptcy protection.