Delphi Headed for C7 Liquidation

Robert Farago
by Robert Farago
delphi headed for c7 liquidation

As Edward Niedermeyer reported earlier today, the re-organization plan for Delphi pegs the bankrupt parts maker and former GM division’s worth at $7.2b (down from $12.8b). Delphi’s “valuation” is ridiculous; the company is still highly dependent on GM’s biz. Banking on GM is like entrusting a quasi-governmental lender to Rep. Barney Frank. To wit: today’s market cap for General Motors was under $5b, after the American automaker’s stock tumbled to its lowest level ($8.24 a share) in more than 54 years. Bottom line: Delphi is unlikely to emerge from bankruptcy; it will be liquidated. Meanwhile, let”s hope misery loves company; Fitch Ratings downgraded Ford’s credit to GM’s sub-basement level: CCC. Oh, and Fitch dropped Ford Motor Credit to the same rating (explaining Mazda’s decision to cut bait and fish with their own auto loan sources). Bottom line: the credit crisis is hitting GM and Ford (and Chrysler) at both the sharp end (auto loans) AND the macro-level (access to working capital). The center will not hold.

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4 of 7 comments
  • Matthew Danda Matthew Danda on Oct 07, 2008

    I guess GM will be nationalized after all (once they default on the gov't loans). Whodathunk, in America of all places.

  • 50merc 50merc on Oct 07, 2008

    It's "cut bait [do nothing] OR fish [do something]." GM is cutting bait with the Impala. Ford went fishing with the Flex. Paul, thanks for reminding us that inflation distorts comparisons of nominal dollars. Strippo, you're right on the "going concern" issue. A year or more ago I was wondering how GM's auditors were facing up to the question of the viability of a unprofitable company with liabilities greater than assets.

  • John Horner John Horner on Oct 07, 2008

    Maybe we can call the final solution American-Leyland, just for old times sake.

  • Robert Schwartz Robert Schwartz on Oct 07, 2008

    Liquidated? no. To liquidate something you need buyers. Scrapped is more like it. Won't cover the legal fees.