The General Motors spin-off of Delphi which never really was, isn’t. Today’s Wall Street Journal [sub] has another “people involved in the negotiations”-sourced story claiming that these latest moves are all “part of a strategy to qualify for additional government loans”. Delphi has never really been an independent company from the start. The obvious reason of course is that GM provides the vast majority of Delphi’s business. But more than that, GM is on the hook for Delphi’s pension costs, has paid the price for voluntary separations at Delphi and has repeatedly been the source of bailout bucks for Delphi. Considering that “since 2005, GM has poured in $11.7 billion to help sustain the company,” they might as well just call it the Delphi Division. But how do federal bailout dollars get wrapped up in this mess?
“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% of Delphi’s total sales—GM would be taking a calculated bet it can creatively pry more support from the government. As long as GM owes the government money, all its transactions over $100 million are subject to approval by the Treasury Department, which oversees loans to the auto makers. As it reviews a proposal for GM to absorb part of Delphi, the Treasury could borrow from the approach Washington took on the financial-sector meltdown last fall, seeing value in the consolidation of otherwise-failed businesses.” Yeah Sparky, we see how well the Wells Fargo-Merrill Lynch thing has been going, so lets do the same with GM-Delphi!
Delphi has been stuck in bankruptcy court for three years now and can’t get out because nobody wants to lend it any money. This latest Hail Mary pass is built on the belief that lenders would be more likely to give Delphi money if it did less business with GM, and that the government will give GM even money if it clearly owns even more money-losing factories. The madness of it all boggles the mind. Good luck sorting this out Mr. Car Czar, whoever you are! Meanwhile, the executive bonuses and Wall Street advising fees paid out celebrating the birth of Delphi remain in the hands of the masters of the universe who cooked the books to make it happen.
I think it was Wells Fargo/Wachovia and Bank of America/Merrill Lynch (neither of which are going well, for that matter).
Combining two losers into a single, bigger loser just to get more of our taxpayer bucks is downright disgusting.
“GM would be taking a calculated bet it can creatively pry more support from the government”
Just let that quote soak in for a second…..
GM now realizes that it’s more profitable (and easier) to reorganize their product lines and business model, not on what is ‘viable’, rather what is the best way to get more money from the Fed’s.
Just great. Now, for every production cutback they can make up the difference with US Gov’t cash.
Can I go Fucking Postal now? With the President out pouring his Kool-Ad today and there will be taker’s,!the height of this madness just gets worse.Never mind what happens next year or the next lets just get our share and worry about it later.We as a whole are screwed and just trying to hold on to what I have worked for will be the biggest battle have I ever fought.And I ask myself,why would I buy a car from the Big 2?
Yes, getting the 20% that GM needs to stay alive are also the most profitable portions of Delphi. Those that are overseeing delphi’s chapter 11 will find no problem with letting gm have it so they can go straight to chapter 7 and get rid of all the other parts of delphi that are not making any money, that no one wants to buy or takeover or get for nothing.
“Delphi has been stuck in bankruptcy court for three years now and can’t get out because nobody wants to lend it any money”.
Yep faux spin off, as I understand, they are still directly networked into GM system.
It seems people forget why APP and others pulled April of 08. What was a conflict of interest on Delphi’s part to accept funding from GM. Although a work around was put into place and approved by Drain to funnel funding through a 3rd party, the other investors argued the point. This is now a tax payer conflict of interest, and here again GM is pushing the letter of policy. I think inquiring minds want to know what is going on inside of the ailing parts supplier.
Used cars FTW!
As a Delphi engineer, I can say that GM makes up just over a majority of our business by sales (just over 50%). Since we spun off, the marching orders have been to grow non-GM business so that we would be less dependent on GM. Ford and Toyota are huge customers. For example, Ford/Volvo’s active safety system is a Delphi system, and we make quite a few Toyota radio systems.
Bloomberg has a blurb to the effect that the govt. has hired some lawyers to give advice on restructuring GM and Chrysler with attention to whether the taxpayers will be first in line to get their money back. Anybody paying attention to this thing at all has to see quickly that it’s a black hole, but the results associated with the 2.8 and their suppliers going down are hideous. If we aren’t headed for a depression, it’ll be a very good imitation.
Anybody paying attention to this thing at all has to see quickly that it’s a black hole, but the results associated with the 2.8 and their suppliers going down are hideous. If we aren’t headed for a depression, it’ll be a very good imitation.
That is a problem here. There is a good argument to be made that softening the blow will benefit the economy as a whole. Despite the horrendous costs, the total cost alternative may be even worse. There seems to be a philisophical rejection of any such thought here. If you only look at the business case then you will always get the same answer for the Big Three: In the long term they are fucked.
If we were not standing on the edge of a precipice then the Big Three would be allowed to die a just death. Aside from some midwestern states, there would not be much politcal support to prop them up. A good number of previously screwed americans would like to roast marshmellows in the ashes, but not if it causes loss of their own jobs. Ignoring the wider implications of the bailout is ridiculous.
after roughly $400,000,000 in legal fees we end up with further proof that Wagoner truly deserves to be called Red Ink Rick. boggles the mind how this incompetent man remains…
“I can say that GM makes up just over a majority of our business by sales (just over 50%)”
Hmmm, maybe those other customers should be hit up for billions of dollars in keep-the-lights-on money then.
If Delphi is absorbed back into GM, the other carmakers that deal with Delphi will want to cancel their contracts. One of the reasons Delphi split off in the first place was because the other car companies did not want to have GM get access to their future products through Delphi (we had heard stories of pressure on certain managers to show to GM their competitors’ plans). If they go back to GM, watch Toyota and Honda and all the others try to get out of their contracts, especially once they get a second source up and running, which I would not be surprised that they already have plans to do so, considering the dire staits that Delphi is in and they do not want to be left with no parts if they did go chapter 7.
BM, “after roughly $400,000,000 in legal fees we end up with further proof that Wagoner truly deserves to be called Red Ink Rick. boggles the mind how this incompetent man remains…”
Funny huh how the mess GM is in has striking similarities to Delphi’s quagmire. Battenberg and Dawes, former Delphi, came from the same GM mold as RIR, Red Ink Rick and perpetrated some of the same money mumbo jumbo as did GM and ended up in C11, the difference is, the SEC let GM off the so called hook. WTF is wrong with this country and the people/companies we rely upon to maintain corporate integrity . . . including our government! Are these economic principals part of the educational curriculum that is gained while earning a degree? Yea I know, I’m being sarcastic but the fact remains, those individuals need to be held accountable and there are a lot of them!
snafu:
WTF is wrong with this country and the people/companies we rely upon to maintain corporate integrity . . . including our government!
Bring back the hostile takeover.
Allow a couple of billionaires to buy GM, take it to bankruptcy, gut it.
Long term (over 3+ years), the Chevy and Caddy brands gotta be worth a few billion – even if all the product you’re selling is made in Korea.