Dear Mr. Berko:

I bought 150 shares of Delphi Corp., the huge auto parts manufacturer, in early 2004 at a little over $10 a share. The company was making good money, the dividend was 21 cents a share and its book value according to Standard & Poor’s was $3.10 a share. This company was selling more than $30 billion of auto parts all over the world and had 45,000 employees, and now it has declared bankruptcy. How can a huge international company that makes very necessary products like auto parts, which are sold in every country where cars are, declare bankruptcy? I used to buy Delphi products for my car; they were well made and had a long life.

What went wrong here? Delphi was making good money for the last five years and it looked as if things were going good, and then suddenly they declared bankruptcy. Do you think I should buy another 150 shares in case the company gets back on its feet and becomes profitable again?

W.S., Des Moines

Dear W.S.:

Delphi Corp. (DPH) now trades at 36 cents a share and you can now buy about 4,200 shares for what your original 150 shares cost you. However, pigs don’t fly, camels don’t cry and Delphi ain’t coming back to $10 a share, at least not in the corporate structure in which you knew the company.

DPH was a $30 billion revenue company that made a large variety of components for the automotive industry. Delphi also made replacement parts for the worldwide aftermarket industry. Delphi made shafts, condensers, filters, steering systems, chassis, electronics, audio systems, safety systems and batteries plus thousands of large and small parts that heat or cool your car, make your car stop, go, idle, turn left or travel at 70 mph, parts that cool the engine, gizmos that feed fuel to the pistons, thingamajigs that make your windows go up or down and doodads that control myriad other things in your car.

Did you know that Delphi employees are “given” wages of $65 an hour? That’s $2,600 a week or $135,000 a year! In this new global economy, it’s no wonder Delphi declared bankruptcy. There isn’t another assembly line in the galaxy where workers are given six-figure incomes.

Seven years ago, my neighbor’s son Bruce quit his job as a certified public accountant to make $30,000 more per year at Delphi. He worked fewer hours without the responsibilities and pressures, and if he worked overtime, he got paid for it. Please note the use of the word “given.” I use that word because Bruce and many others at Delphi admittedly work five hours a day while getting paid for eight hours. Bruce is a street-smart 44-year-old. He knows that he can’t get fired, that working for Delphi was a sinecure like working for the state or federal government. And Bruce knew that when Delphi’s business got slow and he was on temporary layoff, the company had to pay him nearly every penny of his annual earnings until they called him back.

When identical auto parts are made in China or India, where labor costs are $1 an hour, it’s impossible for Delphi to compete. Of course, Delphi could modernize its plants and purchase more productive equipment, eliminating 50 percent of its workforce. However, because the unions require Delphi to pay every furloughed worker 95 percent of ordinary wages, management has no incentive to invest in modern equipment. Delphi’s only course of action was to declare bankruptcy.

In this global economy, many U.S. companies are moving overseas, not just to find lower wages but to find motivated workers, better infrastructure, lower health-care costs and freedom from inane union work rules.

Your 150 shares of Delphi will never get back to $10 a share. Eventually your shares will stop trading altogether. And like the stock certificates of Eastern Airlines, FAO Schwartz, Bethlehem Steel, New York Central Railroad and Winn Dixie, your certificates will be better used as interesting wallpaper.

When Delphi comes out of bankruptcy, I wouldn’t buy the new shares, either. Auto part makers are rust belt/smokestack industries and can’t attract investor enthusiasm. In this new global economy, Americans can’t compete with flight attendants, technical support people, laborers who make computer chips, airline pilots, service representatives, clothing manufacturers, medical diagnosticians, computer programmers, etc., from Asia or the Near East who earn 20 percent of what American workers make.

In ancient Greece, Delphi was the place where Greeks sought a glimpse of the future. That seems like an appropriate name for a company the future of which seems to be a harbinger for an entire industry.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

© Copley News Service