Delphi Corp on Monday posted a second-quarter loss on production cuts by major customer General Motors Corp and said it may have to file for bankruptcy if it cannot reduce high wage and benefit costs. The largest US auto parts supplier, whose shares fell nearly 14 percent, said it expects continued year-over-year declines in North American vehicle production this quarter, hurting revenue and margins.
"Clearly Delphi is under pressure here, and their threat (of bankruptcy) is a real threat," said Tim Ghriskey, chief investment officer for Solaris Asset Management. "Their first order of business is to try to renegotiate some of those (union) deals and terms to ensure the viability of the US business."
Delphi reported a net loss of $338 million, or 60 cents per share, compared with year-earlier net income of $143 million, or 25 cents per share.
Excluding $49 million of restructuring charges, Delphi reported a loss of 52 cents per share, missing by a penny the forecast from analysts polled by Reuters Estimates.
Revenue fell to $7 billion from $7.5 billion. An 18 percent decline in sales to GM more than offset growth of 6 percent in other revenue to about $3.6 billion, Delphi said.
Besides lower production from GM, high commodity costs and increasing costs for pension and health care benefits contributed to the quarterly loss, Delphi said. The company's non-GM business outside the United States performed well.
Delphi, which has struggled to become profitable since GM spun it off in 1999, is in talks with the world's largest automaker and the United Auto Workers union about cutting high US wage and benefit costs to try to avoid bankruptcy.
The company wants the right to close underperforming plants and cut about 4,000 inactive union workers, although the discussions include the entire US work force, acting Chief Financial Officer John Sheehan told Reuters.
Delphi said it would consider a Chapter 11 bankruptcy reorganisation of US operations if it cannot cut wages and benefits. In a quarterly regulatory filing, the company said a change in US bankruptcy law should reduce the flexibility of corporations that file for bankruptcy protection after October 17.