In perhaps the least surprising business move of the year, Delphi Corp. and 38 of its U.S. subsidiaries filed chapter 11 reorganization cases today in an attempt to restructure its money-losing auto supply business and resolve over-priced union contracts. Delphi advised the bankruptcy court in its initial filings that it has secured a $4.5 billion in debtor-in-possession financing and that it hopes to emerge from its reorganization in mid-2007.

By filing for bankruptcy, Delphi effectively ends bailout talks with its top customer and former parent — General Motors Corp. — and with the United Auto Workers Union. Without progress being made in those negotiations, Delphi elected to file its chapter 11 case before October 17, when new amendments to the Bankruptcy Code take effect that have a generally negative effect on corporate debtors. Delphi, which was spun off from GM in 1999, employs approximately 33,000 UAW workers in the U.S., pays benefits to 12,000 union retirees, and has annual revenues of about $28 billion.
Delphi has been in a world of hurt business-wise for some time. Faced with a daunting landscape of high labor costs, rising raw material costs and falling demand from its top U.S. customers, Delphi has struggled for the past several years to generate a profit — last year, the company lost an astounding $4.9 billion and lost another $750 million in the first half of this year. The Pension Benefit Guaranty Corp., the quasi-governmental agency that administers failed public pension plans, will probably wind up administering Delphi’s pension plan, which is underfunded by $4.3 billion.