Delphi, GM Shares Plummet

[BeatleBoot]

http://www.freep.com/news/latestnews/pm6578_20051010.htm

Delphi, GM shares plummet

Monday, October 10, 2005
BY JOE GUY COLLIER
FREE PRESS BUSINESS WRITER

Shares of Delphi Corp. plummeted and General Motors Corp. shares also took a hit Monday morning after the weekend bankruptcy filing by Delphi.

Delphi's shares fell 65 cents, or 58%, to 47 cents by midday. GM's shares fell $1.28, or 4.5%, to $27.01 by midday.

Banc of America Securities lowered its rating of GM from neutral to sell, issuing a report that raised the odds of a GM bankruptcy to 30% from 10%.

The drop in Delphi shares was expected. Shares of stock often become worth just pennies on the dollar after a company goes through bankruptcy.

GM is taking a hit because of its close ties to Delphi. The auto supplier was spun off six years ago from GM, which remains Delphi's largest customer.

At the time Delphi was spun off, GM promised the unions it would cover pensions and retirement benefits if Delphi filed for bankruptcy.

The filing adds several risks for GM, Banc of America analyst Ronald Tadross wrote in a report released Monday. Delphi's bankruptcy could hurt GM by increasing retirement liabilities, raising prices on parts, disrupting supply and creating new costs for tools if it has to move to other suppliers, Tadross wrote in the report.

The bankruptcy filing also sends a signal that GM could be in trouble as it negotiates with the UAW, the report said. Delphi and the UAW were unable to reach a new agreement before filing for bankruptcy that could have lowered the company's costs.

If Delphi could not get concessions, GM could have trouble as well, Tandross wrote.

"It is our view that bankruptcy protection for GM is increasingly looking like a reasonable way to properly address the company's retirement liabilities and job security benefits," he wrote.

[napi21]

1. I heard on CNN that there's a possibility that GM could have to file

bankruptcy too.

Even CNN said they culdn't believe that was even being discussed!

[daleo]

2. It is all a scam to get out of their obligations

Pensions, health-care, union contracts, etc. They will probably burn lots of suppliers too. This will be the new genius maneuverer by the executive class for the next few years - no better than Enron.

[Porcupine]

3. Not a scam. Peak Oil, credit bubble, depression......

but the truth is that we've been borrowing on next weeks paycheck as a nation for some time now. Katrina and Rita just told the world we got a big pay cut.

[Robert Oak]

4. scam

while they are saying workers have to take a 63% pay cut
and they dump the pensions into the "let's get out of our obligation"
federal system...
they move the jobs offshore..

then the executive staff already increased their own pay by the millions.

Makes Enron and Worldcom look like they stole some candy in comparison.