Delphi faces an uphill climb despite a strong product portfolio and a much smaller North American work force after more than two years in bankruptcy, says Kirk Ludtke, senior vice president with CRT Capital Group LLC in Stamford, Conn.
The scaled-back sum plus the cash Delphi should be able to generate from operations will be enough for it to operate successfully, Ludtke predicts. After emerging from Chapter 11, he says, Delphi will be a mostly overseas electronics company with low costs. Most of its unprofitable commodity businesses have been divested or closed.
But if it can't get the whole $5.2 billion financing from banks and syndicates, Delphi has an ace in the hole. GM might be willing to lend Delphi the shortfall because of the supplier's importance to its production lines, Ludtke says.
Delphi, whose post-bankruptcy revenue is pegged at $20 billion, will continue to generate about 25 percent of its sales from GM.
GM already has paid most of a more than $7 billion tab for union buyouts and early retirements that will shrink Delphi's unionized U.S. work force from 34,000 at the October 2005 Chapter 11 filing to a projected level of 6,200 at emergence from Chapter 11.
GM also agreed to kick in more than $250 million to a private-equity group trying to buy Delphi's global steering business. That operation has annual revenues of $2.6 billion.
Delphi was GM's parts-making operation until it was spun off in 1999.