http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20080115/BUSINESS03/801150327Auto-parts suppliers Delphi Corp. and Toledo's Dana Corp. entered bankruptcy court about two years ago citing similar problems: labor costs that were rising at the same time that vehicle production at Detroit's three automakers was falling.
Dana is poised to escape Chapter 11 this month with exit financing and all-star directors in hand. But Delphi, which filed for protection five months earlier, still must raise $5.2 billion in a tight credit market to exit bankruptcy proceedings by the end of March, its stated goal.
The differing fortunes of these firms show the importance of union relations in a bankruptcy-law turnaround, especially where labor's support can be coupled with a large equity investment.
Dana's exit strategy has been aided by an investment plan launched by a private-equity fund recruited by its unions. It also put a labor-approved candidate, former Missouri Rep. Richard Gephardt, on its board.
In contrast, Delphi's chief executive officer, Steve Miller, has been in a grudge match with the head of the United Auto Workers since taking the reins in 2005.
UAW President Ron Gettelfinger said any progress in talks came "despite Steve Miller," and he accuses Mr. Miller of trying to break the union. He has called the CEO and his executive team "pigs slopping at the trough," for their pay packages.
Dana's speedier exit also appears to show that a new bankruptcy code, which took effect in October, 2005, could expedite the process. A change in the law curtails how long a company controls its reorganization plan, which is further incentive to remain cordial with unions and other key stakeholders, turnaround experts say.
Speed also is crucial because large corporate bankruptcies are costly. Legal and professional fees at Delphi and Dana average $10 million a month or more. Dana has reported spending $214 million on fees through the end of September. Delphi has spent $300 million.