General Motors looking to buy Delphi steering unit
03 Mar 2009
General Motors Corp. plans to buy back the steering business of its bankrupt former unit Delphi Corp. as part of an agreement to help the parts maker restructure, people familiar with the discussions said.
GM has been in talks with Delphi for several weeks, hoping to buy some plants that are central to GM's vehicle manufacturing. Delphi, which has been in bankruptcy protection since October 2005, is GM's largest supplier and is a former subsidiary. (See: GM contemplating taking over Delphi assets: Report)
The plan, scheduled to be included in a regulatory filing as soon as today, is part of GM's support of Delphi's more than three-year attempt to emerge from bankruptcy. GM may also say it will speed up the timing of some of its scheduled payments to Delphi. The deal would give GM more control over the production of its vehicles and enable it to step away somewhat from its participation in Delphi's reorganization process.
GM, already relying on $13.4 billion in government loans to survive, said on 17 February that a plan to end losses and repay the government includes further support for Delphi, including the possible re-purchase of plants. GM is seeking as much as $16.6 billion in additional funds, including $2 billion by the end of this month, or it may be forced into bankruptcy. (See: GM, Chrysler demand $22 billion more; to slash jobs, production lines)
GM spun off Delphi in 1999, but retained responsibility for paying for the health care and pension benefits of thousands of Delphi's union workers. The parts company went into bankruptcy protection in October 2005 and has yet to emerge. The company reached an accommodation agreement with bankruptcy lenders in December to allow the continued use of funds past the end of the year. GM has spent more than $11 billion on Delphi's restructuring. (See: GM agrees to hike Delphi funding to $10.6 billion)
A GM purchase of the Saginaw, Michigan-based Delphi unit would supplant Beverly Hills, California-based Platinum Equity LLC, which won approval from the US bankruptcy court to buy the steering business in February 2008. The Platinum deal was valued at $447 million, with the assumption of $190 million in debt and $257 million Delphi will get from GM under a supply agreement.
