Auto Service World
News   September 27, 2005   by Auto Service World

Analysts Warn of No Winners if Delphi Declares Bankruptcy

Credit markets were skittish on Monday as fears grew of bankruptcy filing by Delphi Corp.
Delphi, the largest U.S. parts supplier and a major source for General Motors, has struggled with lagging OE demand and legacy costs for benefits and pensions.
According to analysts, the ripple effect if Delphi does file for bankruptcy would be substantial. It would be the largest bankruptcy filing to date in the U.S. automotive industry.
Analysts predict that credit investors would lose from the bankruptcy and none would profit, even if they were betting on Delphi’s rivals, including former Ford Motor Co. unit Visteon Inc.
“No one is going to win if Delphi files for bankruptcy,” Tim Nelson, credit analyst at US Bancorp Asset Management told Reuters.
A Delphi bankruptcy might push some of its own ailing suppliers into bankruptcy, which could lead to a significant disruption in the supply chain for the entire industry, Nelson and other analysts warned.
Many of those smaller companies also supply Visteon and other major parts suppliers.
A letter from a Merrill Lynch analyst warned last week that a bankruptcy filing could strangle tier 2 and 3 companies’ liquidity.
Essentially, analysts are warning that Delphi’s situation cannot be isolated; auto industry credit notes are moving together in the market.

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