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Auto parts maker Delphi Corp. sought bankruptcy protection Saturday after the company was unable to secure the assistance it said it needed from its workers and former parent. Troy, Mich.-based Delphi, the nation’s largest maker of auto parts, filed at the U.S. Bankruptcy Court for the Southern District of New York. The company said it has secured $4.5 billion in debtor-in-possession and other financing from a consortium of lenders including JPMorgan Chase & Co. and Citigroup Inc. The company reported $17.1 billion in assets and $22.2 billion in liabilities in its Chapter 11 petition, which included 38 of Delphi’s U.S. subsidiaries but none of its overseas units. Delphi had warned in recent weeks that it could be forced into Chapter 11 if it was unable to negotiate an aid package from General Motors Corp., its former parent, and the United Auto Workers. Delphi, which has lost more than $700 million through the first half of 2005, was seeking cuts totaling more than 50 percent of current wage and benefit rates from workers, according to union reports, and an extensive assistance from General Motors. “We simply cannot afford to continue to be encumbered by high legacy issues and burdensome restrictions under current labor agreements that impair our ability to compete,” said Robert S. “Steve” Miller, a turnaround veteran hired earlier this year as Delphi’s chairman and CEO, in a press release announcing the bankruptcy filing. In a separate press release, Delphi said Saturday it had received “bridge orders” from Judge Arthur Gonzalez in the New York court allowing it to continue paying workers and using its cash management system. It expected to return to court on today for a hearing on various first-day motions. Many in the industry had expected the company to continue negotiations until closer to Oct. 17, when a change in U.S. bankruptcy law would make it more difficult for new filers to complete a court-assisted restructuring. Saturday’s filing was viewed as a sign that the talks with GM and workers were not progressing as Delphi management had hoped. “An early filing is a pretty clear indication that talks are not progressing,” one auto industry banker said. “A Delphi bankruptcy is unlikely to be pleasant for anyone involved.” Shares of Delphi lost nearly half of their value on Friday as investors worried that a bankruptcy could be imminent. The filing follows reports that the company has been unable to strike a concession deal with its workers. In an Oct. 6 letter to members, UAW leaders noted that under the wage package that Delphi was suggesting, “the UAW member would not be able to afford a vehicle that our products are assembled into.” Delphi might also terminate its pension plans, which are underfunded by more than $4 billion, following the lead of bankrupt airlines that have already used the courts to transfer liabilities to the federal Pension Benefit Guaranty Corp. From GM, Delphi had been seeking a bailout similar to what Ford Motor Co. provided to its offspring Visteon Corp. in May. Terms of that deal allowed Van Buren Township, Mich.-based Visteon to transfer 24 plants and facilities in the U.S. and Mexico to a new holding company to be managed by Ford. Industry sources said the filing has mixed consequences for GM. Under the 1999 agreement that led to the spinoff of Delphi, GM could be forced to take responsibility for benefits lost to Delphi retirees during the restructuring. However, that agreement also gives GM a claim to Delphi assets in a bankruptcy, giving the automaker a chance to gain a substantial equity stake in a slimmed-down company. GM has been shoring up its own finances in recent months. The company last week said it would divest its stake in the Japanese maker of Subaru cars, Fuji Heavy Industries Ltd., for upwards of $800 million, a move that some believed could have helped finance a bailout of Delphi. On the eve of the filing, Delphi said it had improved its severance package for top executives, granting top employees 18 months of severance pay and some bonus payments should they be terminated or leave for good reason. Severance packages were previously capped at 12 months, a policy that Delphi said in a regulatory filing was not competitive. With the filing, Delphi continues the steady march by auto parts makers into the courts. Already this year, large parts makers including Collins & Aikman Corp., Tower Automotive Inc. and Meridian Automotive Systems Inc. have all filed for Chapter 11, squeezed by cost-cutting automaker customers and by high energy and raw material prices. Delphi filed a motion seeking court permission to hire Skadden, Arps, Slate, Meagher & Flom as debtor counsel. It also hopes to retain FTI Consulting Inc. as restructuring and financial adviser in the case and Rothschild Inc. as investment banker and financial adviser. Peter Edmonston contributed to this report. Copyright �2005 TDD, LLC. All rights reserved.

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