An Able Mechanic for Delphi?
By David Welch
Struggling auto-parts maker Delphi Corp. (DPH ) may tap a real bailout guy as its next top executive. The company is said to be courting former Bethlehem Steel and Waste Management (WMI ) executive Robert S. Miller Jr. about taking the place of Delphi Chairman and CEO J.T. Battenberg III, BusinessWeek Online has learned. Battenberg will retire this year. Sources say Miller, who lives in Oregon, will make up his mind in the next week or two.
Delphi officials declined comment. Miller, 63, serves on the boards of several companies, including bankrupt United Airlines (UALAQ ), and is the non-executive board chairman of troubled auto-parts maker Federal Mogul (FDMLQ ). He said in a telephone interview last week that he's not sure he wants to take on a full-time post. "Every time a company has a fire to put out my name comes up," Miller said. "It's a monster. I would have to think long and hard about it."
Miller may have just the expertise ailing Delphi needs. He has worked fix-it jobs throughout his career, starting with Chrysler back in the early 1980s. Miller was Chrysler's CFO when the carmaker had to restructure and get a bailout from the federal government to avoid bankruptcy. Since then, he has worked turnaround jobs at Morrison Knudsen in 1995, Waste Management in 1998, and more recently at Federal Mogul. He also has plenty of experience in bankruptcy court with Bethlehem Steel and Federal Mogul.
Delphi is not on the verge of filing for Chapter 11 protection -- at least not immediately -- but analysts say the outfit could follow some airlines and steelmakers into bankruptcy court to abrogate costly union contracts and pension obligations. Delphi's pension fund is underfunded by $4 billion, says Standard & Poor's analyst Martin King. Delphi will borrow money to pay its pension costs. The company has seen revenues decline since its largest customer, General Motors (GM ), has been cutting production (see BW, 3/14/05, "A Wrench for Parts Suppliers")
The auto-parts maker's workers have the same union contract that assemblers for GM, Ford (F ), and DaimlerChrysler's (DCX ) Chrysler Group have. That means they make about $20 an hour, while many competing parts makers pay less than $15 an hour. Delphi cannot lay those workers off without paying them up to 95% of their wages. As a result, Delphi has 3,000 workers on paid layoff, which could cost them more than $300 million this year, King says.
Bankruptcy could get Delphi out of its union obligations. But S&P's King says the company has $1 billion in cash and enough credit to avoid a Chapter 11 filing for a while.
Delphi still keeps bleeding red ink, though. The company lost $36 million last year, on sales of $28.7 billion. In the latest first quarter, the loss widened to $409 million, and UBS analyst Robert Hinchliffe expects it to balloon to $851 million this year.
Given those problems, Miller could be just the guy to help patch things up. Don't expect him to stay long, though. He usually only hangs around long enough to get a company back on track, and then he moves on to the next big turnaround job.
Welch is BusinessWeek's Detroit bureau chief
Edited by Phil Mintz
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