When is enough, enough? GM has to be asking that about their former subsidiary Delphi. The AP [via Forbes] reports that The General has agreed to lend the parts maker another $350m "so Delphi can maintain a minimum level of liquidity." That brings GM's financial stake in the company they thought they'd dumped spun-off to $900m in loans. And that's on top of the $3.6b they paid out to cover Delphi's UAW pension liabilities. Delphi has been in Chapter 11 since October 2005. Their bankruptcy original plan included exiting Ch 11 this past spring with an equity deal and massive loans. When Appaloosa Management and other investors backed out of a $2.55b equity deal at the last minute, Delphi had to go back to square one. Last week, bankruptcy Judge Robert Drain ruled that Delphi can file a lawsuit against Appaloosa and the other investors. Until that's settled (and assuming the lawyers don't eat up whatever settlement they get), it looks like GM will continue bailing out their largest supplier. The question is, who will bail out GM?
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I suppose it makes a change to see GM dumping millions of dollars into another bottomless pit (i.e Rick Wagoner’s salary).
Incidentally, are GM expecting to see these “loans” repayed in full? Or is the word “loan” being thrown about so there’s an illusion of GM getting their money back….?
Delphi will go chapter 7, which will push GM into chapter 11, if Delphi does not come out of this bankruptcy protection by the end of the year. Even if they could get someone (like Denso, Johnson Controls, Visteon, etc) to buy the profitable parts of Delphi, the parts stoppage will allow GM to have another work stoppage to thin out their inventory. If and when someone buys those Delphi divisions that are wanted, if it takes too long to do so, it will drag GM into bankruptcy protection. Delphi is the weakest link in GM’s precarious financial condition; their products are in too many GM vehicles. Pull the Delphi plug on their life support (“loans” from GM) and GM knows they’ll follow them into the same grave.
Katie —
There’s still time to edit your post! Can’t you somehow work in the word ‘oracular’ ?
We Yanks expect no less…
Good Lord! General Motors has become the world poster child for absolute corporate insanity.
General Motors is very much akin to Adolph Hitler in that: take the road we want and stay on it until the world goes up in flames and then blame everyone for the flames. Poor GM they are an ultimate embarassment to America and Americans.
The question is, who will bail out GM?
That’s pretty obvious isn’t it? After all, what good are taxpayers if they can’t bail out failed corporations?
So if Delphi goes under, it takes GM with it. According to the people responsible for setting the odds for this sort of thing (the insurance banks) there is a greater than 95% chance of this happening.
If ResCap goes under, it takes GMAC and GM with it. Again, a greater than 95% of this happening.
If GM doesn’t shut off the truck plants quick, they will go under. Again, a greater than 95% chance of this happening.
Does anybody think there is actually a chance of GM existing 2-3 years from now?
Netrun–
I think so, and I’m a Chrysler guy.
A bunch of import-loving cheerleaders won’t close America’s automobile manufacturers down– Even if they’re the majority.
The 3 will find their way.
Seems like the pebble in the pond syndrome – once one goes many others will follow. The Delphi/GM link is so intertwined that one cannot exist without the other. Will they be around in two or three years – I wouldn’t put any money on it!