Delphi digs deep into credit for operations

Delphi Corp., the biggest U.S. supplier of auto parts, said it borrowed $1.5 billion from banks, a day after Chief Executive Officer Steve Miller suggested the company faces bankruptcy unless it cuts costs.

The Troy, Mich.-based company also confirmed it’s in restructuring talks with GM, its former parent and largest customer, and the UAW, which represents around 2,200 local Delphi hourly workers and 25,000 nationwide. The restructuring will focus on controlling labor costs and the 13 operations the company considers unprofitable or uncompetitive.

Delphi began drawing on its $1.8 billion line of credit Aug. 3, according to a statement released today. The funds will bolster the $1.16 billion in cash it had in the first quarter, the most since it was spun off from GM in 1999.

Borrowing from credit lines is "a move a company might take ahead of a Chapter 11 filing," UBS Securities analyst Rob Hinchliffe wrote in an investor report. "Should Delphi enter Chapter 11, the company would be able to terminate unprofitable business with GM."

Rumors that Delphi was talking with GM and its top union about how to restructure its operations were circulating even before Delphi’s new chairman and chief executive, Robert S. Miller, joined the company July 1. He is a veteran turnaround specialist who took Bethlehem Steel Corp. into bankruptcy in 2001 and engineered restructuring efforts at Waste Management Inc. and Aetna Inc.

In May, Delphi reported a loss of $409 million, or 74 cents a share, for the January-March period, compared with earnings of $53 million, or 9 cents a share, last year. The Troy, Mich.-based company said it expects to lose more this year than the $350 million previously forecast.