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Bankruptcy rescue may change Delphi

Alisa Roth Dec 21, 2006

TESS VIGELAND: Today Highland Capital Management joined the bidding for Delphi.It’s offering almost $5 billion in financing to help get the company out of bankruptcy. When it filed for Chapter 11 just over a year ago, industry observers offered little hope of Delphi’s survival. What’s changed? Here’s Marketplace’s Alisa Roth.

ALISA ROTH: As of today, Delphi’s two biggest investors are both trying to throw money at the company, with rival plans to help the parts-maker emerge from bankruptcy.

On Monday, a group of investors led by Delphi’s biggest shareholder, private equity firm Appaloosa Management, offered to pump as much as $3.4 billion into Delphi.

Today, Delphi’s second-biggest shareholder, hedge fund Highland Capital Management, upped the ante, promising to invest $4.7 billion. Consultant Craig Fitzgerald advises parts makers:

CRAIG FITZGERALD: This is really a very different business that will emerge from Chapter 11 than the business that went in. It’s fundamentally more focused, more competitive. And I think the interest by these funds is reflective of the business prospects for Delphi.

Fitzgerald says Delphi’s expanding its products, its client base and its geographic reach. He expects more consolidation in the industry, which he says will give Delphi even more room to grow.

Not everybody is so optimistic about the future. Greg Lehmos Stein follows parts makers for Standard & Poors.

GREG LEHMOS STEIN: Two thousand six has been a very tough year for suppliers with raw-material cost increases. And those who have most of their business with the Big Three have seen shrinking market share by their customers. And there’s a good possibility that 2007 may be even worse.

And even consultant Fitzgerald agrees the outlook isn’t uniformly rosy. He says whatever happens at Delphi, the future will hold fewer jobs for factory workers.

In New York, I’m Alisa Roth for Marketplace.

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