About globalization and the death of the economy

Firms in the Globalization Craze, and Bankruptcy Court


Bankruptcy has become the fashionable way for large U.S. corporations to shed most of their U.S. operations and their pension and health care obligations as well. This then created the condition where mega-cartel companies can be created on a global scale, like Mittal’s global steel empire. A General Motors (GM), Nissan- Renault merger
combination would be even worse. The Leveraged Buyout (LBO) and Mergers and Acquisitions (M & A) frenzy seem to be back. In the case of General Motors (GM), it had split off its auto parts division in 1999, and renamed it Delphi, just as Ford split off its parts division to create Visteon Corporation. Delphi is an independent company with close business ties to GM. In October 2005, it filed for bankruptcy. In the name of “shareholder values” its facilities in the U.S. are being largely shut down, and its pension and health care obligations, including to retirees, are being dumped on the Government’s PBGC and on GM. The PBGC, Pension Benefits Guarantee Corporation itself could be made broke.

According to New York bankruptcy court documents, the bankruptcy of Delphi was engineered and directed by the small boutique investment house, Rohatyn Inc., of Felix Rohatyn, formerly of Lazard Inc, and also with the help of Rothschild Inc. These companies have had experience with the bankruptcies of many Airlines, Steel Companies and other large industrial companies since the early 1980s. Felix Rohatyn is also famous for his heading of the New York City Municipal Assistance Corporation (Big Mac) in 1975. What happened in the case of the bankruptcy of Delphi, which is still winding its way through the courts, is the use of bankruptcy to dump a good chunk of its health care and pension obligations onto the Pension Benefits Guarantee Corporation and the U.S. Government. Delphi’s CEO Robert “Steve” Miller has been carrying out this plan before and after the bankruptcy.
The Delphi bankruptcy also allowed the auctioning off of millions of dollars of machine tool equipment from the auto parts plants, some of it in newer condition than may have been suspected. Who knows, they may even be being bought and sold, eventually wind up in Delphi’s overseas plants which are of a large number and growing. Steve Miller, as Delphi’s new CEO, acted to shut down U.S. operations, after the bankruptcy, representing the Debtor-In-Possession (DIP). He obtained credit of $2 billion from Chase and Citigroup to “restructure”, which gives these new creditors a strong degree of control of the bankrupt corporation.
Delphi is in effect dozens of companies. Its bankruptcy was of all the companies under its umbrella in the United States. In addition to its 37,000 U.S. workers as of June 2006, Delphi has 60,000 employees in Mexico and an additional 60,000 employees in other countries, for a total of 157,000 workers as of June. According to the current interpretation of U.S. bankruptcy law, Delphi’s U.S. bankruptcy proceeding is allowed to ignore the overseas operations and assets of Delphi’s foreign subsidiaries. How many assets and facilities were shipped overseas before the bankruptcy? This is unknown but even leading financial press, such as Business Week magazine of April 2006 have characterized these actions as “globalization by bankruptcy”.

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