$4.5 billion of Delphi's GM work up for grabs

DETROIT -- General Motors could shift up to $4.5 billion in contracts from Delphi Corp. to competitors.

As Delphi leaves several major lines of business as part of its U.S. bankruptcy restructuring, suppliers are snatching chunks of work that GM is pleased to source elsewhere.

The feeling is mutual: Delphi already has asked the bankruptcy court to void 5,472 of its GM contracts.

Meanwhile, GM is finding new suppliers to produce some of Delphi's components. For example, Siemens VDO will produce part of the intake manifold for GM's newly introduced GMT900 SUVs. GM also has found new suppliers to produce sparkplugs previously made at Delphi's Flint East plant, said GM purchasing chief Bo Andersson at a press conference last week.

That trickle of new contracts promises to become a flood. Andersson says he is asking GM's "best suppliers" to take on additional work that Delphi no longer wants.

About $4.5 billion of GM business now in the hands of Delphi is up for grabs, according to an Automotive News estimate. That is equivalent to the North American original-equipment sales of ArvinMeritor Inc., North America's ninth-largest parts supplier.

The $4.5 billion reflects the GM portion of Delphi's U.S. sales that the supplier no longer considers to be core.

Those numbers include eight plants making low-tech or commodity products in Delphi's Automotive Holdings Group, as well as two plants at Saginaw Steering in Saginaw, Mich.; Milwaukee's catalytic converter plant; and the Sandusky, Ohio, bearing plant.

Delphi intends to keep just eight of its 29 U.S. plants. The rest will either be sold or closed.

Delphi's rivals are taking advantage of the opportunities. Siemens VDO expects GM's intake manifold contract to be worth $60 million in annual revenue, a Siemens spokesman said.

GM has enlisted four suppliers to make sparkplugs formerly produced by Delphi. They are Denso Corp., Beru AG, NGK and Honeywell International Inc. Delphi no longer wanted to produce sparkplugs, said GM spokesman Tom Wickham.

GM cannot unilaterally move business while a contract is in force. That must be done with the cooperation of Delphi, he said.

GM and Delphi have good reasons for reducing their dependency on each other. GM contends that it pays a $2 billion annual premium on the $14 billion in parts that it buys from Delphi. And Delphi says GM pays too little for thousands of Delphi parts.

On March 31 Delphi asked the U.S. Bankruptcy Court in New York to terminate its labor contracts, but it also asked for court permission to break 5,472 GM contracts to negotiate price increases. GM opposes the motion. Those money-losing contracts represent about half, or $7 billion, in parts that Delphi sells annually to GM.

Delphi reported a 2005 operating loss of $2.2 billion on U.S. revenue of $11.5 billion, according to bankruptcy court filings.

Delphi intends to work with customers, unions and other stakeholders to make sure the transition of noncore business to other suppliers proceeds smoothly, said Delphi spokeswoman Claudia Piccinin.

One consideration in the sale of plants is the ability of a buyer to invest in the business, she said.

You may e-mail Dave Barkholz at [email protected]