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Delphi Closing Cadiz Bearing Plant
Delphi Corp. announced its Spanish arm, Delphi Automotive de Espana S.A., will close a bearing and suspension parts plant in Puerto Real, Cadiz, southern Spain. Delphi has six plants in Spain.
Delphi's U.S. operations filed for Chapter 11 bankruptcy protection in October 2005; the bankruptcy does not include other divisions and plants around the world.
Globally, however, the company has classified several product categories as "non-core," the bearings and steering system components manufactured in Puerto Real among them. Plants producing non-core products are subject to sale or closing, in line with the reorganization plan.
According to Delphi filings, Puerto Real manufactures components for DaimlerChrysler, Ford, General Motors, Kia, Nissan, Renault, and Volvo.
From the beginning, Delphi's mishandling of the Puerto Real losing has been brutally criticized from every quarter, to the point of sparking civil unrest and top government intervention. Employees, the Cadiz area community, customers, vendors, and government from local to the Prime Minister have become embroiled -- putting Delphi on the defensive and ensuring the situation will not be resolved quickly, easily, or inexpensively.
Cadiz already suffers with the highest unemployment rate in all of Spain. Delphi, said one observer, "is simply the last straw."
Although 1,600 direct jobs will be lost in Puerto Real, the indirect impact is widespread. Union and government estimates put the total at more than 5,000 jobs lost when suppliers, service firms, and related businesses such as worker-dependent retailers are included, across 14 communities.
The plant closing announcement was delivered to Puerto Real's UGT labor union officials in the morning and to the plant's workers that same afternoon.
In its announcement, Delphi said Puerto Real has four strikes against it: first, production is almost entirely non-core items; second, despite incentives, the plant has lost nearly USD $200 million over the past five years; third, Puerto Real is carrying a cost structure with no path to profitability; and fourth, there has been no serious interest from any outside buyer or investor.
The statement said: "Faced by this situation of lack of alternatives to the plant closure, the company has set in motion today the necessary procedures to close the plant."
While a portion of Delphi Steering has been sold off to a private equity firm, Platinum Equity LLC, Puerto Real was not included in the deal.
The parceling out has done little to help Delphi, which reported a $5.5 billion net loss for 2006, and lost $186 million this past January alone.
Filed shortly after the announcement, Delphi's 10-K coverage is Spartan:
Delphi's Chapter 11 Filings related solely to its U.S. operations. Delphi's operations outside the United States generally are profitable and cash flow positive. Nevertheless, we have been and will continue to seek to optimize our manufacturing footprint in Western Europe. We expect that such trend will continue. In particular, in February 2007 our Spanish subsidiary announced the planned closure of a chassis and steering products manufacturing facility in Cadiz, Spain. The facility has approximately 1,600 employees. Our Spanish subsidiary is exploring all strategic options to contain the costs associated with such closure. Delphi has not recognized any significant amounts related to this planned closure as of year-end. However, based on the February 2007 announcement Delphi could incur costs for closure based on the outcome of negotiations with the unions representing the affected employees.
GKN was the first to benefit from Delphi's decision. Opel and Peugeot reportedly exercised options to terminate Puerto Real's supply contracts, sending the work to GKN.
Fearing disruptions, Ford reportedly took the opposite tack and accelerated deliveries under a bearing supply contract -- requesting immediate delivery of 40,000 bearings on top of already-strained normal daily production of just 7,500.
More than 150 workers had recently been laid off from Puerto Real's bearing manufacturing operations, reportedly as customers sensed impending problems and switched vendors to SKF.
People familiar with the situation told eBearing they belive SKF has been the primary beneficiary of Puerto Real's problems, although Ford and SKF have supposedly disagreed over quality audit results.
Exacerbating customer problems, Puerto Real workers and the entire Cadiz community immediately mobilized in massive protest marches. Workers began small scale protests and sit-ins, with more than 3,000 people joining in to protest outside Delphi Spain's headquarters.
As Delphi dug in its heels, the situation quickly escalated, and a cascading series of events have gradually made day-to-day operations at Puerto Real increasingly difficult.
In early March, more than 50,000 people took to the streets of Cadiz, chanting and parading banners such as. "Delphi Can't Be Closed," and "You Can't Play With Our Lives."
Local politicians, stoked by public opinion and roused by the general hysteria, declared the matter still open, and pledged to become directly involved and begin their own investigations.
The controversy quickly enveloped Prime Minister Jose Luis Rodriguez Zapatero, who ordered a working group to be set up to review the Delphi situation, and the entire Cadiz region's economic depression and employment issues.
Workers then briefly took over Puerto Real, demanding Delphi turn it over to be nationalized, run by the regional government.
Meanwhile, worker complaints triggered an investigation into allegations about Delphi's use of funds and asset transfers. Specifically, charges were leveled that Delphi violated terms of its financial incentives package by transferring manufacturing equipment from Puerto Real to a sister plant in Poland.
The Cadiz government got involved, demanding an audit of Delphi's fixed assets at the plant, to determine if equipment had already been moved out. At issue are incentive pacts totaling more than $20 million, reached in 2005 and extending through 2010. Delphi countered the allegations, saying it has, "scrupulously met its legal requirements," even though they run through 2010.
The Parliament has threatened to put an embargo on Delphi removing any equipment from Puerto Real, and considered a court order forcing it to remain open.
Delphi USA has since announced it will contribute an additional $70 million to Delphi Spain, earmarked for use in plumping up separation allowances.
Every Tuesday and Thursday since mid-March, many workers across Cadiz have been staging half-day slowdowns and stoppages -- adding to the pressure and keeping Delphi in the public eye. Daily protests continue at Puerto Real.
Delphi Spain has now announced its Puerto Real plant has declared bankruptcy, saying a negotiated closing is clearly impossible.
Last week, as many as 300,000 workers (out of 800,000 encouraged to do so) across southern Spain staged a general one-day strike to protest the plant closing and show support for Delphi workers.
Public transportation and sanitation services were the most obviously impacted, while many manufacturing plants were forced to close for the day.
That move brought the Prime Minister's involvement again. Sr. Rodriguez Zapatero made a Congressional announcement that the State Legal Service has filed a motion to block Delphi's bankruptcy petition and initiate its own investigation. He told Congress that every level of government must work together to ensure Delphi continues operating and complying with the terms of the 2005 incentive plan.
At Puerto Real, the N-443 road to Delphi was blocked by piles of rocks and burning debris. Workers gathered, many wearing T-shirts and chanting, "If Delphi closes, war, war, war."
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| GE20AW bearing | 20 | 55 | 20 |
| GE17AW bearing | 17 | 47 | 16 |