In keeping with tradition, GM announced it latest “wait ’til the weekend” share-price-rattling revelation: the automaker has agreed to provide an additional $4.6b support to former division and bankrupt parts maker Delphi, from $6b to $10.6b. Justifying the cash burn to Automotive News [AN, sub], GM said it’s doing the deal “to speed the auto parts maker’s emergence from bankruptcy.” Here’s the break down [via The Detroit News] “Under the deal, reached after months of negotiations and outlined in a court filing late Friday, GM would assume responsibility for $3.4 billion of Delphi’s hourly pension obligations — up from $1.5 billion — and make payments totaling $1.2 billion through Dec. 31 to boost the supplier’s balance sheet.” In its press release, Delphi said the cash infusion will put it in a position to pursue exit financing, through an equity-based rights offering. “Pursue” and “secure.” Two different words. In other words, with Delphi’s U.S. business experiencing the same kind of turnaround that GM’s currently “enjoying,” the clock is still ticking on Delphi’s Chapter 7 liquidation.
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“I don’t know if you’ve been keeping up with current events, but we just got our asses kicked, pal. Game over, man. Game over.”
If you are in the right mood, this whole GM saga is really funny. It’s like a black comedy.
Is there some sort of time limit on the whole Delphi fiasco? Doesn’t their lawsuit against their private equity ex-partner have to pan out?
My memory ain’t so hot, so correct me if I’m wrong, but wasn’t there a story about GM foisting its own pension obligations onto Delphi when the spin-off occurred? Something along the lines of “GM would assume responsibility for $3.4 billion of its own Delphi’s hourly pension obligations” or some such?
The so called spin off of Delphi is starting to look like a big fat lie. The ongoing dependency of GM on this “independent” Delphi along with the endless un-accounted for financial liabilities calls into question whether Delphi was ever really spun off at all. And how about the big bonuses the executives got paid as a reward for doing the deal in the first place? Are they giving that money back?
John Horner: And how about the big bonuses the executives got paid as a reward for doing the deal in the first place? Are they giving that money back?
Well said, Mr Horner.
But I suppose our tax dollars at work will take care of all that with Federally guaranteed loans.. After all, it’s an election year.
John Horner:
And how about the big bonuses the executives got paid as a reward for doing the deal in the first place? Are they giving that money back?
GM execs knew Delphi was an uncompetitive money pit when they spun it off. Perhaps they thought Delphi’s Miller could come up with a recipe to correct an old-skool manufacturing icon. Cutting the Delphi limb from the GM tree made sense – it needed to grow on its own. The fact that the limb died didn’t mean it wasn’t a smart bet.
Caterpillar pulled this off nearly 2 decades ago. Mix replacement workers with new plants in the south and lean manufacturing and you’ve got a world class company.
Yet another reason for all GM and Delphi employees to quit and move. The light at the end of the tunnel is another train coming at you.
The inevitable bailout/taxpayer funded boondoggle will offshore any job they can. Fortunately, the wealthy, do-nothing executives can’t be offshored. Only their jobs will be safe. Take heart.