Delphi's Polish parts plans won't stall

The travails which the US' ailing automakers have experienced over the past few months are now claiming casualties among companies with significant Polish investments. On October 8, Delphi Corporation, the largest US auto-parts supplier, filed for bankruptcy. The company employs some 6,000 workers in Poland at six production facilities and the Kraków Technical Center, which together last year recorded sales of $732 (zł.2,367) million. In its 11 years in Poland, Delphi has invested over $380 (zł.1,230) million here.

Now, a huge reduction in orders from its biggest customer, General Motors (GM), has put the squeeze on Delphi, already overburdened with expensive employee retirement and health-care packages. Last year the company recorded $4.75 (zł.15.36) billion in losses, and has already hemorrhaged $741 (zł.2,396) million this year.

In an affidavit filed in a New York bankruptcy court, Delphi's chief executive, Steve Miller, said that Delphi needs "significant cost reductions and labor modifications" in order to reorganize. Significant downsizing - including the closing of several production facilities and the laying off of thousands of workers - is expected.

But Polish operations will go untouched, according to the company's executive in Poland, Marek Adamiak. "Firms belonging to Delphi in Poland are in a good financial condition, have a competitive cost structure as well as a diverse client base," the president of Delphi Poland told Rzeczpospolita.

The part-producer's main problems lie in a whopping $11 (zł.35.6) billion in pension, health-care and other retiree liabilities to its US workforce. Lower wage and benefit costs in Poland - where labor is cheap and health care is covered by the government - mean that Delphi's Polish production has been profitable. Thus, instead of scaling back its Polish production, the company has just signed an agreement with government officials to invest a further zł.5 million in Kraków for a new R&D center which will employ some 264 highly-trained engineers.

Delphi Poland is also much less dependent on GM's patronage. Only 22 percent of Delphi's European products are bought by GM Europe, whose operations, in contrast to its North American sister, have been performing relatively strongly.

GM Europe recorded earnings of $37 (zł.120) million in Q2 2005, while General Motors' North American branch lost $1.2 (zł.3.9) billion over the same period. As a result, Delphi's operations here in Poland should remain prosperous, even while the outlook for Delphi's North American works looks bleak.