As Delphi Emerges From Bankruptcy, Executive Regrets the Bumpy Ride
Turnaround specialist Robert S. "Steve" Miller helped revive Bethlehem Steel Corp. and Federal Mogul Corp. by restructuring them while they were under bankruptcy-court protection. But until he tackled Delphi Corp., he never knew a bankruptcy could get so messy -- or so personal.
The largest U.S. auto-parts maker sought bankruptcy protection in October 2005, shortly after Mr. Miller joined as chief executive.
His blunt complaints about the wages of certain hourly workers and his plan to give hefty bonuses to lieutenants sparked a firestorm and led him to cut his $1.5 million salary to $1 a year.
Nonetheless, scores of union members picketed his office in Troy, Mich., in August 2006. "Miller isn't worth a buck," one sign read.
The CEO slashed Delphi's hourly work force nearly in half, cut 40% of the salaried staff and closed 21 of the 29 U.S. factories.
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Brian Harkin for The Wall Street Journal
Robert S. Miller, who is stepping down at Delphi, says it's a great time to be finishing up bankruptcy.
Delphi's first bankruptcy-exit plan fell apart last year amid the financial crisis and plunging auto sales, and the company came perilously close to liquidation. Now, it's set to emerge from bankruptcy Tuesday with the sale of its assets to former parent General Motors Corp. and its lenders.
Mr. Miller, who became Delphi's executive chairman in 2007, will step down. In a recent interview, he offered a mixed view of bankruptcy.
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Delphi's Miller on Strikes, Priorities Excerpts:
WSJ: As the recession recedes, how do things look for companies emerging from bankruptcy?
Mr. Miller: It's a great time to be finishing up bankruptcy. At this low point in the economic cycle, you're able to make hard choices on restructuring. You emerge less burdened with debt and with much leaner operating costs.
It might be a blessing in disguise that we didn't exit bankruptcy last year. We might have been forced into a second bankruptcy because of the serious decline in the automotive markets. [Instead,] Delphi will come out with one of the strongest balance sheets in the auto industry.
We had a cost problem in the U.S. that looked insurmountable. That has been resolved by modifying labor agreements and selling and closing plants. The company terminated its liability for retirees' pensions and health-care benefits.
The bad news is that a lot of our people suffered. I regularly apologize to many [U.S.] salaried retirees who send me e-mails. They say things like, "May you rot in hell. How are you ever going to be able to face your maker?"
WSJ: Will we see more bankruptcies?
Mr. Miller: The recovery is going to be slow, but we have been through the worst.
The fact that there have been only 75 auto-industry bankruptcies is surprising. I thought a lot more suppliers would be driven to the wall.
Boss Talk: Robert Miller on Delphi's Bankruptcy
3:17
WSJ's Joann Lublin speaks with Robert "Steve" Miller, executive chairman at Delphi Corp., about his experience on leading the troubled company through bankruptcy.
WSJ: How would you handle a bankruptcy differently next time?
Mr. Miller: Bankruptcy is a very clumsy tool. It's extremely expensive. We spent over $100 million a year for professional fees. Nothing could have allowed us to get it done any quicker. The external environment kept changing. Our labor unions didn't want to deal with this expeditiously.
The rules of the game need to be seriously questioned. Due process for every last claimant doesn't allow the business to regenerate on a timetable that works.
WSJ: What would you change?
Mr. Miller: Give judges more authority to do things in the best interest of the enterprise value of the company.
WSJ: What lessons would you offer companies entering bankruptcy?
Mr. Miller: Decide what are the most important things, then get those done. In my case, it would have perhaps been a tactical advantage to take strikes in order to deal with the labor situation. But if you had disruptions, you would harm General Motors -- half of our business at the time. You have a living, breathing business to maintain. Do whatever's necessary to keep your managers.
WSJ: You were criticized for calling unionized Delphi workers overpaid. How should other bankrupt businesses deal with labor costs and unions?
Mr. Miller: Delphi's case was unique. Our labor costs were roughly triple what any other unionized U.S. [auto] supplier was bearing.
It was not my intention to take a hard line. The union leadership chose to portray it as a hard line. When I said, 'I can't afford $65 an hour for somebody mowing the lawn,' that was simply trying to explain some sources of our problem. It became an insult to many [Delphi] skilled workers. I regret it became so twisted.
My advice would be to work [issues] out directly with labor. As head of Bethlehem Steel, I met on a regular basis with the head of the steelworkers' union. I brought him to talk to my board about what we should be doing. It was a surprise and disappointment that I was unable to achieve that with the UAW.
WSJ: In 2005, you said management of a bankrupt company should be communicative. How did that work at Delphi?
Mr. Miller: I was very outspoken when we went into Chapter 11. But there was a lot of pushback and criticism. We made the decision to shut up. But if I had to do it all over again, I would keep speaking out. When you are in a controversial situation, you are going to be criticized whatever you do.
The critics said, "Steve Miller is the devil incarnate," and we said, "No comment." The only thing left out there for the public was the notion of a devil.
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Now there are only 4 Delphi Plants in the U.S. and one is slated to close soon! ( Rochester, N.Y. ) is the one I heard.
The other 36 are outside the U.S.
Great Job Dick Head !
Starve the Nation feed the Third World.
