Delphi Corporation Case

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Delphi Corporation began as a business unit within General Motors (GM) that eventually broke off in 1999 and pursued its own strategic path to grow its business and become more profitable. Delphi became a large global supplier of automotive parts for many large companies like Ford, Volkswagen, Nissan, Daimler Chrysler and Hyundai and managed to remain profitable for 2 years after the separation from GM, but expenses accumulated and profits wore away resulting in each following year recording another loss for Delphi. In 1999 when Delphi became independent, non-GM revenue only totaled approximately $6.9 billion versus $22.3 billion from just GM, compared to $15.4 billion from non-GM and $10.5 billion from GM in 2007 (Exhibit 1, 2). In the year 2005 Delphi incurred a loss of $2.357 billion, and it was crucial for Delphi to make a move to try and implement a plan of reorganization (POR) within their corporation and keep it going to avoid having to liquidate assets. In October 2005 Delphi Corporation filed voluntary petitions to declare Chapter 11 bankruptcy. Delphi was a Fortune 500 company at this time and the bankruptcy filing ranked at the 9th largest in US history. It was important for Delphi to file for bankruptcy rather than negotiate reorganization with their various claimants because of the protection a Chapter 11 filing provides. Under the Chapter 11 Bankruptcy code, a corporate entity that goes into bankruptcy is granted an automatic stay. An automatic stay provides the bankrupt company with protection as it halts any collection efforts of various claimants while management work on designing and effectively implementing a plan of reorganization (POR). This automatic stay period was important for Delphi, as they needed the protection time in order to make a POR. If they did not declare bankruptcy, but rather tried to negotiate with the claimants, they

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