GM agrees to hike Delphi funding to $10.6 billion

13 September 2008

Mumbai: General Motors Corporation has agreed to provide a total of $10.6 billion, including an additional $4.6 billion, in financial support to Delphi Corporation, to speed the auto parts maker's emergence from bankruptcy. 

Under the deal intended to make former GM subsidiary Delphi a stand-alone company, GM would also assume $3.4 billion in pension obligations for the parts maker's workers.

The move has been opposed by Delphi's creditors even as Delphi, which filed for bankruptcy protection in 2005, warned in a court filing that ''a viable stand-alone business plan may not be possible'' without GM's support.

Delphi was forced to renegotiate a revival plan after an investor group led by Appaloosa Management backed out of a $2.55 billion equity investment deal to support its emergence from bankruptcy in April.

Delphi, which is seeking bankruptcy court approval for a funding plan, said the proposed support from GM would allow it to pursue new exit financing, including an equity offering.

GM, which saw its US auto sales fall to near 15-year lows, has so far taken a total of $10.6 billion in charges for Delphi's reorganisation, including $2.8 billion in the second quarter.