Auto parts maker's IPO completes 6-year comeback

@CNNMoney November 17, 2011: 5:12 PM ET

NEW YORK (CNNMoney) -- In another sign of the turnaround of the U.S. auto industry, parts maker Delphi Automotive's initial public offering began trading Thursday, a little more than six years after it filed for bankruptcy protection.

But the former parts unit of General Motors (GM, Fortune 500) had a less successful launch than its former parent, which had its own post-bankruptcy IPO a year ago.

Delphi (DLPH) shares priced at $22, the low end of its previously filed price range, but traded below that Thursday and closed at $21.33. The offering raised $530 million for the company's shareholders.

Delphi filed for bankruptcy in October 2005, one of the first major bankruptcies in an industry that would be hit by widespread business failures among parts suppliers in the subsequent years.

The string of bankruptcies eventually concluded with the federal bailouts and bankruptcies of GM and Chrysler Group in 2009. The federal bailout also extended assistance to other suppliers.

Since the low point of 2009, U.S. auto sales have rebounded by about 22%, although they still are well below the pre-recession sales levels. But new labor agreements, plant closings and other cuts made during the reorganizations of recent years have produced profits at all three major U.S. automakers as well as across much of the supplier base.

In its pre-IPO filings Delphi reported net income of $911 million in the first nine months of the year, up 49% from a year earlier. Revenue of $12.1 billion in the nine months was up 19%.

Today's Delphi is much different from the one that filed for bankruptcy six years ago. Then, it was primarily a U.S. company dependent on sales to GM. It had 185,000 employees, a significant portion of which were represented by the United Auto Workers union.

But since then, it closed 70 plants and reduced our product lines from 119 to 33. Today, 91% of its staff is located in low-wage countries and none are represented by the UAW.

Still, despite the new cost structure and new profitability, this has been a difficult year for auto stocks with growing concerns about a weakening global economy. GM shares are down 36% since its IPO, and shares of Ford Motor (F, Fortune 500) have matched that decline over that period.

"If the automobile market is not dynamic, this offering is not going to do well," said Francis Gaskins of IPOdesktop.com.

The proceeds of the IPO are going to the group of investors who provided Delphi the financing it needed to emerge from bankruptcy in 2009. Hedge fund Paulson & Co. is getting about 85% of the proceeds as it reduces its stake in the company from 22% to 15%.

"Part of the problem with offering is that Paulson is bailing out, and investors have to wonder, do you want to be on the other side of his deal?" said Gaskins. To top of page

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