Delphi Corporation

Delphi's 2005 bankruptcy was the largest American manufacturing bankruptcy at the time, demonstrating how GM's problems were exported to its suppliers. The auto parts company had been spun off from GM in 1999, inheriting GM's labor contracts without GM's scale to support them. When GM reduced orders and demanded price cuts, Delphi couldn't absorb the pressure. The mechanism failure was inherited obligations without inherited advantages. Delphi's workforce had UAW contracts negotiated when they were GM employees—wages, benefits, and pensions that assumed GM's profitability. But Delphi competed against global suppliers with dramatically lower labor costs. The company couldn't reduce legacy obligations and couldn't compete on costs. This is parasitic inheritance—obligations from a parent that continue consuming resources after separation. Delphi's bankruptcy forced massive concessions from UAW workers—wages cut from $27/hour to $14/hour—and eliminated 20,000 jobs. The company emerged from bankruptcy in 2009 (after GM's own bankruptcy restructured their relationship) as a smaller, non-union entity. The case demonstrated how supply chain interdependencies transmit failures: GM's problems became Delphi's bankruptcy became supplier layoffs became regional economic devastation.