GM contemplating taking over Delphi assets: Report
09 Feb 2009
General Motors (GM) is in talks to take back large portions of Delphi, the parts supplier GM spun off a decade ago, in a move that is part of a strategy to qualify for additional government loans, The Wall Street Journal reports.
The automaker also is expected to pursue the closure of more auto-assembly plants beyond the nine shutdowns it has already announced, the Journal reports, citing people familiar with the matter.
GM has seen sales fall further than expected since it submitted a turnaround plan to Congress in December and the automaker is under added pressure to absorb the auto-parts plants, even as it trims its car-making operations, the newspaper reported.
As per the report, GM executives have been in negotiations over Delphi plants since December. Delphi and its lenders have asked for at least $2 billion, but GM hopes to pay little or nothing because of its previous agreements with Delphi. The talks mainly include up to five Delphi plants that produce exclusive parts for GM, including steering systems, radios and air conditioners for models such as the Cadillac CTS and Chevrolet Silverado. The plants under discussion generally employ United Auto Workers-affiliated hourly workers.
The Delphi talks are part of GM's strategy to line up more loans from the US government, which already has committed $13.4 billion to the car company. Delphi has been in bankruptcy protection for more than three years and has been a huge cash drain on GM, which long has subsidised Delphi operations.
GM has taken more than $11 billion in charges for Delphi's reorganisation. GM agreed when it spun Delphi off in 1999 to assume pension and healthcare obligations for thousands of union workers should the supplier be unable to do so. (See: Delphi, GM near deal with workers' union, say reports)
As a separate company from GM, Delphi isn't eligible for the government's auto-bailout aid at this point. In assuming control of some of Delphi's operations - representing up to 20 per cent of Delphi's total sales, GM would be betting it can creatively pry more support from the government, the Journal reports.
Similar to the GM-Delphi relationship, Ford Motor Co. in 2005 took back several parts of Visteon Corp. plants, spun off by the company in 2000.
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