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Delphi gets $3.4 billion in financing
Automaker's board names Rodney O'Neal as CEO

By Tom Krisher
AP Business Writer

DETROIT — A private equity group has offered to pump up to $3.4 billion into Delphi Corp. to help support its emergence from bankruptcy protection, the auto parts maker said Monday.

The company — which makes a slew of parts for autos, including entertainment systems, chassis, electronics and air conditioning — also said that its board named President Rodney O'Neal to replace Chairman Robert S. "Steve" Miller as chief executive, effective Jan. 1. Miller will remain chairman, and O'Neal will remain president.

Delphi's plant in Limestone County has been hard-hit under Miller's reign. More than half of what was once 2,100 workers accepted buyout offers after their employer declared bankruptcy. New hires since Delphi declared bankruptcy are signing on at about half the wages of those they replace.

Under the financing deal, Appaloosa Management LP, Cerberus Capital Management LP and Harbinger Capital Partners Master Fund I, as well as Merrill Lynch & Co. and UBS Securities LLC, will invest a minimum of $1.4 billion and a maximum of $3.4 billion in the struggling company in exchange for common and preferred stock that will be issued in the first half of next year.

The money will be used to fully fund Delphi's pension plan, which at the end of 2005 was underfunded by $4.1 billion, the company said.

The willingness of "very sophisticated" investors who already have a stake in Delphi to put more money into it speaks well for the supplier's
future, said Jim McTevia, a Michigan-based corporate turnaround specialist.

"It looks like Delphi is going to survive," McTevia said. "It's a vote of confidence in the company and the company's ability to get out of Chapter 11 and become a bigger player in the global market."

Troy-based Delphi, the nation's largest auto parts supplier, said the agreement was part of a plan to emerge from bankruptcy protection by the second quarter of 2007. A reorganization framework agreement, signed by Delphi, the investors and former parent General Motors Corp., was included in the deal.

Separately, Delphi accepted a proposal from JPMorgan Chase Bank and a group of lenders to refinance the company's existing $2 billion debtor in possession credit line and about $2.5 billion in loans.

"Today's agreements represent significant milestones in Delphi's reorganization and another major step towards emergence from our Chapter 11 reorganization in the U.S.," Miller said in a statement.

Under the deal, Delphi will offer 135 million new shares for sale sometime during the first half of next year, the company said.

In addition to the new investors, existing shareholders will get rights to buy some of the shares, Delphi said.

GM said in a statement that the deal shows continued progress by Delphi and sets up a framework for the companies to keep negotiating. GM has estimated that it is liable for $6 billion in Delphi employee benefit costs.

"Although we are encouraged by the progress of the negotiations between GM, Delphi and the other stakeholders thus far, we recognize that there are still a number of matters to be resolved and a lot more work is yet to be completed," GM said.

Delphi shares rose 3 cents, or 0.92 percent, to $3.30 in premarket trading Monday.

Delphi, GM's former parts-making arm that was spun off as a separate company, filed for bankruptcy protection in October 2005. It had 21,600 hourly workers at the end of September, the latest figures available.

The parts supplier plans to close or sell 21 of its 29 U.S. plants and focus on operating eight U.S. plants that make electronics, safety systems, heating and air conditioning systems and some mechanical parts. The plants slated for sale or closure make steering systems, brakes, dashboards and other parts that Delphi no longer considers part of its core business.

Delphi also has asked a court for permission to void previous labor contracts. The company continues to negotiate with GM and Delphi's unions on wage reductions for many of its hourly workers and has said it prefers a negotiated settlement to a court order.

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Associated Press Writer David N. Goodman contributed to this report.

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On the Net:

Delphi Corp.: http://www.delphi.com

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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